The Indian cement sector experienced a lacklustre H1 FY25, with demand growing at a modest 2-3%, according to India Ratings and Research (Ind-Ra). This tepid growth was primarily attributed to slowed construction activity caused by general elections, inconsistent weather patterns, and lower infrastructure spending.
The situation is expected to improve in H2 FY25, with construction activity resuming in December. However, a significant recovery in demand is anticipated only in Q4 FY25. The rating agency forecasts low single-digit growth in Q3 FY25, as festive season interruptions in October and November further weigh on demand. The sector’s EBITDA dropped by 15% year-on-year in H1 FY25 due to reduced realisations. However, Ind-Ra expects benign input costs, including falling petcoke prices, to cushion the impact of weak realisations in the second half of the year. Petcoke prices have declined from USD 129 per metric tonne in October 2023 to USD 93 per metric tonne in October 2024, with further reductions anticipated due to China’s impending high-sulphur petcoke ban. Despite improving input costs, cement prices remain under pressure due to heightened competition and subdued demand. Prices fell by approximately 7% in the first seven months of FY25 and are likely to witness further declines before recovering marginally towards year-end.
Capacity utilisation also dropped by 500 basis points to 74% in H1 FY25, as new capacity additions outpaced demand growth. Larger cement manufacturers outperformed smaller players during this challenging period. Mergers and acquisitions have become increasingly prevalent, with notable transactions including Ambuja Cement’s acquisition of Orient Cement and UltraTech Cement’s controlling stake in India Cements. This consolidation trend is expected to continue, particularly in southern India, where smaller firms face intense competition. The outlook for the sector remains cautiously optimistic, with significant growth expected only by the close of FY25. However, with sustained infrastructure initiatives and easing input costs, the long-term prospects for the industry remain promising.
