Amid pick-up in the affordable and rural housing segment and infrastructure- primarily in road and irrigation projects, credit rating agency, ICRA in its latest report has said that the demand for cement is likely to grow by around 6% in the current financial year.
As per the report, cement production during the December 2017-May 2018 period was in the range of 2628.5 million tone and in March 2018, it was highest at 28.5 million tone. The demand from various areas such Andhra Pradesh and Telangana, the eastern region and the western markets provided the support to the production. However, the report noted that sand unavailability continued to impact demand in Rajasthan.
ICRA also mentioned that the cement prices remained flat in Q1 FY19, as rising supplies have not resulted in a significant increase in the cement prices even though the demand momentum is healthy. However, they declined by around 5-6% on a pan-India level in Q1 FY19 and are also expected to remain under pressure in Q2 FY19 due to the monsoons.
Besides, the rating agency found that higher power and fuel (increase in coal and pet coke prices) and freight costs (increase in diesel prices) in the near term are likely to continue to put pressure on the profitability margins and debt metrics of the cement companies.
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