Indian credit agency predicts cement industry growth of 5% in 2017 - 2018 financial year

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India: The India Ratings and Research credit agency predicts that the cement industry will grow by 4 – 5% in the 2017 – 2018 financial year due to demand from infrastructure activities and a revival in housing demand in rural areas led by government spending. In a report it has revised downwards its growth estimates for the 2016 – 2017 period to 3 – 3.5% from 4 – 6% due to the negative effects of demonetisation. It added that, although the price of petcoke and coal has almost doubled since September 2016, it expects that stable cement demand will allow producers to pass these costs onto consumers in the 2017 – 2018 period.

Cement producers will add 50Mt/yr additional production capacity in the 2016 – 2018 period with the eastern region leading growth at 17Mt/yr followed by the north at 14Mt/yr. However, it fears that capacity increases in these regions may outpace demand. India Ratings said that the country’ cement production capacity utilisation rate was 70% in the 2015 – 2016 period and that it was likely to decrease to 65% following the effects of demonetisation. It is expected to rebound back to 70% in the next financial year.

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