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Cement industry to add capacity by 150-160 MT from FY25 to FY28: Crisil

24 Jan 2024 Evaluate

Crisil Ratings in its latest report has said that the cement industry is on course to add capacity by 150-160 million tonnes from FY25 to FY28 as it aims to meet rising demand from the infrastructure and housing sectors. In the past five fiscals, the industry has added capacity by 119 million tonnes (MT) per annum to reach a total of 595 MT now. 

According to the report, the capacity addition is for the purpose of meeting the rising demand as well as to consolidate market share in a highly fragmented and competitive industry. Cement demand grew 8 per cent in fiscal 2022 and 12 per cent in FY23. As much as 70-75 MT capacity addition is expected to be commissioned in next fiscal, with 50-55 per cent concentrated in the eastern and central regions. Large players will account for 50-55 per cent of the planned capacity addition. However, it said incremental supply and stiffer competition will cap price growth but benign cost will protect and aid margins. Robust demand in the past two fiscals has bolstered the balance sheets of large cement players and some mid-sized ones with strong market presence, prompting them to expand capacity on the back of healthy cash accrual and credit profile.

The report further said this fiscal (FY24), demand is projected to grow 10-12 per cent, driven by the government push to affordable housing and pre-election spending on infrastructure. That said, incremental supply and heightened competition will limit price growth to 0-1 per cent, maintaining prices at Rs 390-395 per 50-kg bag, and keep utilisation at 70-75 per cent. Next fiscal, the demand growth is expected to moderate to 4-6 per cent on a high base of the previous three fiscals. Also, rising raw material cost and a flat base will lead to an uptick of 1-3 per cent in prices to Rs 400-405 per 50-kg bag. 


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