India: cement sector on a sound footing, grows at 7.56 per cent

India: cement sector on a sound footing, grows at 7.56 per cent
Published: 13 February 2009

In spite of a slowdown in construction activity, domestic cement despatches have registered a healthy growth of 7.56 per cent during the April-January period on the back of factors like individual housing activity, replacement requirement and Commonwealth games related construction. This growth is better than the projected gross domestic product (GDP) growth of 7.1 per cent for the current fiscal. For January, the growth stood at 8.25 per cent, which is better than the April-January average.

Cement despatches during the said period of the year stood at 146.82Mt (136.49Mt in the previous year’s corresponding period), according to the Cement Manufacturers Association (CMA). In January, despatches stood at 16.13Mt (14.90Mt).

“We wish to have a10 per cent growth. However, consumption has gone down in the realty sector, which is facing a liquidity issue. The current growth is on account of individual construction activity, replacement requirement and the like. The government has announced a number of infrastructure projects. The moment these projects pick up, there will be additional demand”, said A L Kapur, managing director, Ambuja Cement.
“The impact of slowdown in construction activity has been witnessed primarily in metro cities where large builders are active. However, since land prices have softened in smaller cities and towns, the individual construction activity has picked up,” said H M Bangur, president of CMA and managing director, Shree Cement. Bangur added that even if the GDP grows at around six per cent next year, the cement demand would continue to grow at over seven per cent.

Commenting on the domestic cement outlook, the latest ICRA report has said, “After an unexpected slowdown during FY09, the cement sector is expected to witness strong production and consumption growth of nine per cent during the medium-term in line with the economic growth…and the increased activity in the construction sector…Future drivers of cement demand growth in India would be increased spending on road and housing projects.”

The housing sector, which accounts for around 50 per cent of total demand, is likely to continue to be the driving force behind cement demand. The requirement of new dwelling units over a five-year period (2007-12) is estimated at 47.4m in rural areas and 26.5m in urban areas, the report added.