Cement industry to add 70-75 million MT capacity in two years amid slowdown in construction

New Delhi [India], November 28 (ANI): The cement industry in India is expected to witness a significant capacity expansion of 70-75 million metric tonnes (MT) over the next two years, according to the rating agency ICRA.

Of this, around 33-37 million MT will come from clinker capacity, while the rest will be from grinding capacity.

It said "Around 33-35 million MT capacity is likely to be added in FY2025 (FY2024: 32 million MT), while 37-39 million MT addition is expected in FY2026".

The expansion is expected to be led by the eastern and southern regions, which together are projected to add 38-40 million MT during FY2025 and FY2026, with the additions equally distributed between these regions.

Despite the increase in capacity, the agency noted that the utilization rate is estimated to remain moderate. It is expected to improve slightly to 71 per cent in FY2025, compared to 70 per cent in FY2024, driven by higher cement production.

However, ICRA has revised its growth forecast for cement volumes in FY2025, citing a slowdown in construction activities.

The year-on-year (YoY) growth in cement volumes is now expected to be 4-5 per cent, reaching 445-450 million MT, lower than the earlier estimate of 7-8 per cent made in July 2024.

This downward revision is due to slower-than-anticipated construction activity in the housing and infrastructure sectors after the General Elections.

In the second half of FY2025 (H2 FY2025), the agency noted that the industry is likely to benefit from improved farm incomes due to healthy monsoons, strong kharif crop output, and high reservoir levels supporting rabi sowing.

These factors are expected to boost rural consumption, which will drive demand for cement in rural housing. Meanwhile, steady demand for urban housing is likely to further support cement volumes.

"Despite the likely improvement in H2 FY2025, the OPBITDA/MT of the cement companies in ICRA's sample set is estimated to remain under pressure for the full year FY2025, declining by 12-15 per cent on a YoY basis to ₹820-850/MT," said Tushar Bharambe, Assistant Vice President and Sector Head, Corporate Ratings, ICRA.

The infrastructure sector is also expected to gain traction in H2 FY2025, aided by increased government spending on infrastructure projects. With significant headroom for the government to meet its FY2025 revised Budget Estimate, construction activity is anticipated to rise, positively impacting sectors like cement.

However, profitability in the cement sector is expected to remain under pressure in FY2025. (ANI)