ICRA Ratings has said that the domestic cement industry’s capacity utilisation may moderate in current fiscal year (FY20) to sub-70% levels. The agency said the demand revival trend witnessed in recent months is likely to continue in the fourth quarter of FY20. However, sustainability of the same is critical to support the increase in prices.
It further mentioned that the cement demand growth is expected to remain flat in FY20 against the decade high growth of 13% witnessed in the previous year. This growth along with expected higher capacity additions at 20-22 million tonnes per annum (MTPA) in FY20/FY21 (17 MTPA in FY19) is likely to result in moderation of industry’s capacity utilisation in the current fiscal. ICRA Ratings’ assistant vice-president -- Anupama Reddy said the incremental/new supplies are not fully integrated and most of it is backed by old limestone mining leases. Also, given that the grinding capacity addition is higher in relation to the clinker capacities for these new units, the actual production from new capacities could be lower.
Besides, the agency stated that in the nine months of FY20, the production, at 247.4 million tonnes, was marginally higher by 0.7% compared with the corresponding year-ago period. The production has been increasing on an month-on-month basis from September 2019. A double-digit growth in cement demand of 11.8% was witnessed in December 2019.