Cement demand likely to contract 20-25 per cent: CRISIL

Ratings agency CRISIL in its latest report stated that cement demand in India is expected to dip by nearly 20 to 25 per cent in the current fiscal year if the country is unable to contain the pandemic by the month of May. It also said that this would lead to the extension of social distancing measures through June and construction activity beginning only in Q2FY21.

Further, the agency said that Coronavirus has cast a long shadow over a much-anticipated mild recovery in Indian economy in the fiscal year 2021. Besides, other factors such as weak global demand, supply disruptions and global financial shocks; the economy is grappling with lockdown, factory shutdowns, reduced discretionary spending and delayed capex cycle. It said that all these are expected to affect construction and consequently, cement demand. On a quarterly basis, it said that cement demand would be a washout in the first quarter of this fiscal, given that the lockdown measures across India would hurt construction and thus, demand will pick up only from the second half of this fiscal.

The report also mentioned that the government funds are diverted towards health and public welfare. Its capex spends on all construction projects, accounting for nearly 35 to 40 per cent of cement demand, will be significantly lower during the fiscal. Besides, it said that further weakening of the real estate sector will also impact the capex spends and in turn, the overall demand for cement. However, it noted that rural housing, Pradhan Mantri Awas Yojana-rural, Pradhan Mantri Gram Sadak Yojana and spends on the key infrastructure projects will be the saving grace for the sector in the second half of the fiscal.