Cement production demand and growth was primarily driven by the housing sector during the first two months of the financial year 2021-22. During the months of April and May, the cement production was recorded at 54 million tonnes, which is almost a 100 per cent increase in the production of cement during April-May 2020. Last year, 27 million tonnes of cement was produced during the months under review, according to a report by Care Ratings.
This year, the production started picking up because of demand coming from the housing and real estate sector, accounting for 68 per cent of the overall demand. Many low cost affordable housing were introduced this year which made up for 13 per cent of the cement demand. Apart from this, industrial and Infrastructure sectors contributed to the 10 per cent and 22 per cent of the demand, respectively. “The thrust provided by the government in the form of spending on infrastructure such as construction of roads, railways, highways, rural and low-cost affordable infrastructure augurs well for the industry,” the report noted.
However, when compared to the first three months of 2021, the domestic production of cement registered a decline of 12 per cent on a monthly basis in April and this was followed by a de-growth of 17 per cent in May 2021. The decline in production, according to the report, was due to the spike in Covid-19 cases along with the subsequent state-wise restrictions imposed from April 2021 onwards “which affected the demand-supply dynamics for the commodity.”
Meanwhile, the prices for cement have increased this year by 5 per cent as the all-India average wholesale and retail prices now stand at Rs 370 and Rs 380 per 50 kg bag, respectively “This growth in prices can be ascribed to the increase in the cost of inputs: power, fuel and freight expenses account for nearly 50-55 per cent of the total expenditure incurred by the cement players,” read the research note.
Further, analysts at Care Ratings said that right now, the cement industry players seem to be cautiously optimistic on the impact of the second wave of Covid-19 on the cement industry.