India’s cement sector faced a challenging first half in FY25, primarily due to slow construction activities prompted by the general elections and reduced infrastructure spending. According to India Ratings and Research (Ind-Ra), cement demand grew by a modest 2-3% during the first half of FY25, hindered by the impact of elections and adverse weather conditions. However, the agency expects a rebound in the sector, with a notable uptick in demand anticipated for the second half, particularly in the fourth quarter of FY25.
Khushbu Lakhotia, Director of Corporate Ratings at Ind-Ra, stated, “While the sector’s EBITDA declined by 15% year-on-year in H1 FY25, primarily due to lower realisations, we expect the pick-up in demand during H2 FY25 to help offset weak realisations and improve absolute EBITDA. The benign input costs will cushion the impact on unit profitability.” Ind-Ra’s projections suggest a gradual recovery in demand from December 2024, but it is in Q4 FY25 that meaningful growth is expected to materialise. For the third quarter of FY25, the agency anticipates low single-digit growth, as demand typically sees disruptions during the festive season in October and November. According to data from the core industries, cement demand grew by 7% in September 2024 but slowed to just 3% in October 2024.
Despite the anticipated recovery, cement prices are expected to remain under pressure, largely due to intense competition and sluggish demand. Prices fell by around 7% during the first seven months of FY25 and could witness further declines towards the end of the year. The rise in mergers and acquisitions is a noteworthy trend, with major players like Ambuja Cement acquiring Orient Cement and Penna Cement Industries, while UltraTech Cement took a controlling stake in India Cements. Such consolidation is expected to continue, particularly in southern India, as smaller companies face increased difficulties in competing with larger players. In terms of capacity utilisation, the cement sector saw a 500-basis point drop to 74% in H1 FY25, as demand growth remained low while new capacity additions were substantial. Ind-Ra anticipates that with an ongoing expansion pipeline, industry capacity utilisation will continue to decline through FY25.
The prices of petcoke, a key input for cement production, have also been on a downward trend, dropping to approximately USD 93 per metric tonne in October 2024, from USD 102 per metric tonne in September 2024. The decline is attributed to the impending ban on high-sulfur petcoke in China, which, alongside India, is a major consumer of the commodity.
