The cement industry is bracing for a decline in demand during the fourth quarter of the fiscal year, compared to the same period last year. Several factors including a slowdown in construction activities, extended winter conditions, and uncertainty surrounding upcoming elections are anticipated to contribute to this downturn.
Market analysts have projected a decrease in cement demand for the fourth quarter, citing challenges such as weak performance in the previous quarter, adverse weather conditions experienced in various regions during January, and the looming elections scheduled for April-May. Additionally, higher supply coupled with intense competition is expected to exert pricing pressure, potentially impacting sales volumes in the upcoming quarter.
Reports indicate that cement prices have already witnessed a decline in recent months, with reductions ranging from Rs 2 to Rs 12 per bag in January and February, contrary to the typical trend of price hikes during these periods.
The calendar year 2023 marked the third consecutive year of growth for the cement industry, with a notable 13 per cent increase in demand, primarily driven by robust growth in the first half of the year and increased government spending on infrastructure projects along with sustained momentum in the housing sector.
While the demand for cement weakened towards the end of 2023 due to various challenges, including adverse market conditions, experts suggest that the sector saw some recovery in January and February, supported by strong infrastructure projects and a resurgence in housing demand.
Despite the prevailing challenges, market observers remain cautiously optimistic about the industry’s performance in the fourth quarter. They anticipate moderate growth, supported by government-led infrastructure projects, increased commercial capital expenditure, and a peak construction period. It is estimated that the industry’s volume could witness a mid-single-digit year-on-year growth in Q4, with a further 8-9 per cent year-on-year growth expected for the fiscal year 2024 as a whole.
Looking ahead, experts anticipate a year-on-year growth of 7-8% in Q4, with the fiscal year 2024 closing at a 9 per cent year-on-year growth, amounting to approximately 435 million tonnes of cement demand. Recent data indicates that industry demand saw a low double-digit increase in February, reaching 40 million tonnes, suggesting a utilisation rate of 81 per cent.
While challenges persist, industry stakeholders remain hopeful that targeted measures and favourable market conditions will help navigate through the uncertainties and sustain growth momentum in the cement sector.
