Cement production demand and growth was mainly driven by the housing sector in the first two months of FY 2021-22.
Cement production demand and growth was mainly driven by the housing sector in the first two months of FY 2021-22. During the months of April and May, cement production was recorded at 54 million tons, an increase of almost 100% in cement production from April to May 2020. Last year, 27 million tonnes of cement were produced in the months under review, according to a report by Care Ratings.
This year, production began to pick up due to demand from the housing and real estate sector, accounting for 68% of overall demand. Many low-cost affordable housing was introduced this year, which accounted for 13% of cement demand. Apart from this, the industrial and infrastructure sectors contributed 10% and 22% of demand respectively. “The boost provided by the government in the form of spending on infrastructure such as construction of roads, railways, highways, rural and affordable infrastructure at low cost bodes well for the industry” , notes the report.
However, compared to the first three months of 2021, national cement production recorded a 12% decrease on a monthly basis in April, followed by a 17% decrease in May 2021. The drop in production, according to the report, was due to the surge in Covid-19 cases as well as subsequent state-imposed restrictions from April 2021 “which affected the supply and demand dynamics for the product.”
Meanwhile, cement prices have risen by 5% this year, with the average wholesale and retail prices across India now standing at Rs 370 and Rs 380 per 50kg bag, respectively. “This price growth can be attributed to the increase in the cost of inputs: electricity, fuel and freight expenses represent almost 50 to 55% of the total expenses incurred by cement players,” it reads. in the research note.
Additionally, Care Ratings analysts said that at present, cement industry players appear to be cautiously optimistic about the impact of the second wave of Covid-19 on the cement industry.