Demand for cement expected to rise [Feb 2012]

Owing to poor off-take from both construction and infrastructure sectors, the demand for cement is expected to grow between 2 – 5 per cent this year, rating agency Fitch said. Around 40 per cent of the country’s cement demand comes from the real estate sector, while the remaining is driven by the infrastructure activity. Cement demand grew marginally in FY 2010-11 to a little over 200 million tonnes.
The report states activity in both these sectors is expected to remain muted given low real credit growth. Most cement companies are expected to experience pressure on margins in the current fiscal due to a rise in operating costs, Fitch said, adding pressure on margins may continue due to the increased price of imported coal, which is further aggravated by a depreciating rupee.
An existing over-capacity scenario is already there in the cement sector since a long time. The rating agency said operating margins are expected to be stressed as a result of structural overcapacity, which is likely to continue at least until early 2013.

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