Fitch Ratings said it expects India’s demand for cement will grow 10 per cent in fiscal years 2008 and 2009 due to increasing infrastructure spending, real estate development and corporate capital expenditure.
But the ratings agency said its outlook on the Indian cement sector for 2008 is stable to negative, adding it expects export demand for Indian cement to decline to 3Mt in fiscal year 2009 from the estimated 5Mt for 2008 as producers focus on strong domestic demand and as global cement capacities increase.
Fitch believes that the substantial capacity coming on-stream by fiscal years 2009 and 2010 will create an oversupply situation. But it believes the impact will be visible only towards the end of fiscal 2009 and the beginning of fiscal 2010.
Fitch expects realisations to soften from the second half of fiscal 2009, which, coupled with cost increases, are expected to put pressure on EBITDA margins.
With cement prices expected to soften, the ratings agency also said it expects consolidation in the industry to pick up during the year, although the scale and size of the activity will be relatively small.