The rating agency ICRA in its latest report has said that cement demand in India is expected to grow by 8 percent in the financial year 2019-20, which may result in an improvement in the industry's utilisation to 71 percent in FY20 from 65 percent in FY18. It noted that improved capacity utilization is likely to support the price uptick which has been seen since March 2019. Besides, it pointed out that the growth in demand will be driven by a likely 18-20 million tonnes per annum (MTPA) of capacity addition in FY20.
According to the report, during April 2018-February 2019, the domestic cement production surged by around 13 percent as against 6 percent year-on-year growth in FY18. However, it said that a disproportionate part of the capacity addition is grinding opposed to clinker capacity. Thus, it noted that the actual production from new capacities could be lower. It added that with the incremental demand of around 24-28 million tonne being greater than the incremental supply, this is likely to translate to improved capacity utilization.
The agency further stated that while in some regions such as north, north-east and east, the cement players' utilisation is likely to be higher than the national average, in other regions such as south and west, the utilisation is likely to remain muted given the past capacity overhang. It also pointed out that cement production remains healthy supported by the demand in south India, primarily in Andhra Pradesh and Telangana driven by irrigation, low cost housing and infrastructure projects.
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