Home >Industry >Manufacturing >Cement production falls 5.5% in February

Mumbai: Slow pick-up in infrastructure projects and waning pent-up demand has led to a drop in production of cement in the country. During February, production fell by 5.5% compared with 5.8% decline in January 2021 and 7.8% increase in February 2020.

Usually cement production is high during Q4 as construction activities are at its peak.

"Cumulatively domestic cement production has fallen by 15.5% during 11M-FY21 compared with the 13% growth and 1.8% growth achieved during 11M-FY19 and 11M-FY20. Outbreak of the COVID-19 pandemic in the Indian sub-continent which forced the government to announce a nation-wide lockdown, 25th March 2020 onwards which had majorly affected the cumulative domestic cement production. The nationwide lockdown had come at the time when construction activities are at its peak," said Care Ratings in a release.

Capacity utilisation of domestic manufacturers has been around 52.4% during 11 months of FY21 as units have been operating at sub-par capacities along with staggered shifts, but it has been improving from 45% during first half of FY21, 49.5% during nine months to FY21 and 51.2% during 10 months to FY21.

Cement manufacturers had cut down or deferred capital expenditure given the fall in demand and also as companies looked to conserve their capital/cash flows but lately many of the players have been announcing expansion of capex guidance plans.

Cement demand is closely linked to the overall economic growth, particularly of the housing and infrastructure sector. Increasing demand from affordable housing and construction work for other government infrastructure projects like roads, metros, airports, irrigation etc. are demand drivers which support cement demand.

Amid the pandemic, cement consumption is growing in the rural, semi-urban and retail markets. Over the months, cement demand is being driven by rural India due to better labour availability; there has been an increase in construction of rural infrastructure and low-cost housing. Rural demand is usually with regard to the retail market largely which is the housing and repair and modification market). Now as the economy has unlocked, there has been a steady pick up in housing and government infrastructure projects which has resulted in reviving demand across our markets even in urban India.

Real estate markets in Tier-1 cities has been opening up and is garnering good traction with the advent of “work from home", consumers want to buy their own space or a larger space.

Cement demand in terms of low-cost housing is showing green shoots. Cheap housing loans, extension of the CLSS and the need for space is also spurring some demand.

Also, as part of the Atmanirbhar Bharat package, the government has made a provision for an additional outlay of 18,000 crore for the urban housing scheme (PMAY-U). The allocated amount is over and above the Budget Estimates for 2020-21 ( 8,000 crore) and will be through additional allocation and extra-budgetary resources.

Cement production is likely to end FY21 with a fall in production by 11%-13% and capacity utilization by 50-55%. Production of cement has grown by 13.3% during FY19 and fallen by 0.8% during FY20.

Going forward, for FY22 outlook for cement industry 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.

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