Outlook for the cement industry in FY22 seems sanguine due to the government's thrust towards infrastructure creation and development and it being the propeller of growth in the economy going forward, CARE Ratings has said in a report.
"Budgetary allocation made towards roads development, housing and rural infrastructure is slated to lead to an increase in demand for the months to come but at the moment the industry is riddled with the COVID-19 pandemic and issues associated with it. Cement production is however to fall sharply by 12%-14% during FY21 and capacity utilization is to be around 50- 55%.
This will be the steepest ever fall in production (and capacity utilisation) that the industry has ever witnessed. Production of cement has grown by 13.3% during FY19 and fallen by 0.8% during FY20. Cement production is usually closely in-line with demand which is also poised to fall during FY21 even though the operations are still picking up. The industry could benefit with the pent up demand phenomena as the economy has been on an unlock mode," CARE Ratings has said.
Demand side issues
"Going forward the cement industry demand is slowly improving from the disruption created from COVID-19 due pickup in government spends on infrastructure and affordable housing along with rising rural consumption. We believe rural demand will be the major driver for cement considering the monsoons have been favourable in most part of the country. This could translate in an inflow of cash in the rural economy which could commensurate in infrastructure creation thus augmenting cement demand," CARE Ratings has said.