Cement demand expected to grow by up to 20 pc in FY22: ICRA

The volume growth is also likely to support operating margins in FY22 at around 20 to 21 per cent, notwithstanding some cost-side pressures, it added.

New Delhi: Cement demand is expected to increase by up to 20 per cent in the next fiscal year with volume touching FY19-FY20 levels, rating agency ICRA said. The growth would be supported by rural demand, including affordable housing, and recovery in infrastructure segment.

“ICRA expects cement demand to increase by 18-20 per cent in FY2022 over FY2021 with the volumes reaching back to around FY2019-FY2020 levels,” the rating agency said in a statement.

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The volume growth is also likely to support operating margins in FY22 at around 20 to 21 per cent, notwithstanding some cost-side pressures, it added. Capacity additions are expected to get back to around 20-22 MTPA (million tonnes per annum) in FY2022 from around 15-17 MTPA in FY2021, it said.

The eastern region is likely to lead the expansion by adding around 15-17 MTPA capacity during the said period. “With the revival in demand in FY2022 by around 20 per cent, the utilisation is likely to improve to around 64 per cent during the fiscal from the low levels of 56 per cent in the previous year…,” it said.

On input costs, it said, while coal prices continue to remain soft, pet coke prices have increased in the recent months. “Diesel prices also have increased in the current fiscal. Further, with pet coke and diesel prices linked to crude, the prices are likely to remain elevated,” it said.

Going forward, coal price will remain sensitive to demand from China and India, and to the extent of change in the energy mix from coal to natural gas and renewables globally.

ICRA assistant vice-president Anupama Reddy said rural offtake is likely to be supported by positive farm sentiment with timely rabi sowing and favourable groundwater and reservoir levels, which are likely to boost rabi yields.