India: further challenges ahead

Published 15 June 2021

India’s cement demand declined by less than initially anticipated in 2020 and producer profitability was supported by a better-than-expected economic recovery, stable cement prices and greater cost efficiencies. However, GDP growth has been precarious and as the pandemic takes a concerning turn, 2021 may be no less challenging in terms of market dynamics and maintaining cost discipline.

A pick-up in government-led infrastructure projects resulted in incremental cement demand

India’s cement industry, one of the manufacturing sectors worst hit by the country’s nationwide COVID-19 lockdown, has been on a faster recovery trajectory than previously expected. Against an estimated contraction of 25-30 per cent in 2020, consumption actually fell by 14.5 per cent YoY thanks to the government’s infrastructure project push and a surge in demand from individual homebuilders in semi-urban and rural regions.

Meanwhile, cement prices remained stable which has benefitted the balance sheets of local producers. This was yet another positive surprise as analysts had expected cement prices to plummet amid the slowdown in demand.

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