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May 04, 2018

Sector Report: Cement

This report is available to users in India for ₹40,000 + applicable taxes


Table of Contents


  • Summary
  • Segment-Wise Demand
  • Region-Wise Demand
  • Capacity Additions
  • Blending
  • Operating Rates
  • Long Term Outlook
  • Costs & profitability




Robust demand growth in FY18 on a weak FY17; growth momentum to continue itsupward trajectory even in FY19


Continuing on the momentum gained in previous quarter, cement demand rose at14-16% in Q3FY18, fastest in more than 16 quarters. Significant pick-up in affordablehousing and infrastructure activity on a very low base of FY17 propelled the demandgrowth.


We expect Q4FY18 to also post a healthy growth resulting in the year ending at 8-9% yo-y, a level last seen in 2009-10.


In FY19, cement demand is expected to remain healthy and grow by 6.5-7.5%, led byaffordable housing, rural IHB (indirectly supported by govt. rural initiatives) andinfrastructure led activities especially in a pre-election year. Cement demand is expectedto be driven by North and Central region withstate govts. in states such as Rajasthan andMadhya Pradesh, heading for elections in December 2018.


Over a five-year period, cement demand is projected to increase at 6-6.5% CAGR, led bypick up in affordable housing, rise in government spending on infrastructure activities,and healthy rural housing demand following expectations of normal monsoons. Atregional level eastern states followed by central and north regions would see healthiergrowth with continued state governments focus on development.


Operating rates to reverse trend in FY18; increase further in FY19


Aided by robust growth, operating rates are expected to reverse the stagnant trendobserved for last few years and increase to ~72% in FY18. Likewise, in FY19 too,Cementoperating rates are expected to increase marginally, driven by healthy growth in demand.However, upcoming supply is expected to prevent any further sharper rise.


Over the long-term, CRISIL Research projects the industry's capacity utilization toreach 77% by 2022-23 (average 75% over the next five years) with improvement indemand supply balance.


At a regional level, South has the lowest utilization rates at ~60% and continues to be adrag on pan-India utilization rates. With limited capacity additions, the region's operatingrate, which is hovering around 60%, is expected to gradually touch `70% by 2022-23.