'Cement industry to close FY23 with 380 million ton production'

CHENNAI: With healthy demand drivers for cement - urban housing, government's infrastructure and rural development thrust, the industry is expected to close FY23 with a production of 380-390 million ton, said CARE Advisory and Research.

In a research report, CARE Advisory said that India's cement production is to range between 380-390 million tonnes in FY23, a growth rate of 8-9 per cent year-on-year (yoy).

In FY22, production of cement was at 356 million tonnes, up 20 per cent yoy as compared with 296 million tonnes in FY21 due to the low base effect, the report said.

According to the report, India's cement production and consumption both grew by 11 per cent in FY23 (April-November) on a yoy basis, driven by the government's push for infrastructure development and increased real estate activity.

There has been a 7 per cent yoy increase on an average in wholesale cement prices in H1FY23. While the prices have remained flattish in Q3, CARE Ratings expects an increase of about Rs 15-20/50kg bag in Q4FY23, seasonally the strongest quarter, to partially offset the inflationary pressure.

According to CARE Advisory, the EBITDA margins of cement players declined by almost 10 per cent yoy in H1FY23 due to an increase in power and fuel cost on the back of a sharp surge in coal prices. Limestone prices also escalated during H1FY23.

"The cement industry is expected to see a continued uptrend in volume growth in the near term. In FY23, the volume growth is expected to be around 8-9 per cent owing to renewed demand in the housing and infrastructure segment coupled with the government's continued focus on infrastructure development in light of Central elections in 2024. Despite the uptrend in consumption, the profitability of the cement players is expected to decline by 400-500bps in FY23 due to elevated power and fuel cost," Tanvi Shah, Director, Care Advisory said.