The cement demand is expected to decline in the fourth quarter as compared to the year-ago period due to slowdown in construction, extended winter and uncertainty over upcoming elections. Further, higher supply and intense competition would result in pricing pressure, which could affect sales volumes in Q4.
Cement prices have already dwindled by Rs 2- Rs 4 per bag in January and `10-`12 per bag in February, much in contrast to the usual trend of price hikes during these months.
“On the high base of last fiscal (11-13% growth in Q4FY23), cement demand is expected to witness higher single-digit demand growth in Q4, limited by various factors like weak exit from Q3FY24 (impacted by state elections and festive season), extended and extreme winters in some parts of the country during January and upcoming elections in April-May,” Miren Lodha, director-research, Crisil Market Intelligence & Analytics, said.
Festivities and year-end volume push in March is expected to result in subdued prices, he added.
Calendar year 2023 was the third consecutive year of growth, with the industry recording a 13% rise in demand at 433-435 million tonne. This was due to a strong 14%-16% demand growth in the first half of the year, higher infrastructure spending by the government and continued momentum in the housing sector.
The cement demand was weak in November-December of 2023 due to multiple headwinds. However, it improved in January-February, backed by strong infrastructure projects and pick-up in housing demand, according to a Motilal Oswal report.
“We estimate industry volume to improve in Q4, supported by strong demand from government-led infrastructure projects, a pick-up in commercial capex and a peak construction period. Industry volume is likely to be up in mid-single digits y-o-y (up 10-11% q-o-q) in 4Q. We continue to estimate industry volume growth of 8-9% y-o-y in FY24,” it said, adding that the operating profit margins should be range-bound in Q4.
According to Antique Stock Broking, Q4 is likely to see 7-8% y-o-y growth, while FY24 may close with a 9% y-o-y growth at 435 million tonne. The industry demand improved by low double-digit in February to 40 million tonne, which implies an 81% utilisation.
Demand to slow down in 2024
However, demand is expected to slow down to mid-single-digit range after the sturdy growth of 11-13% in 2023, according to Crisil. The prices are also expected to fall marginally by 1-3% in 2024 at `377-379 per bag, after seeing a flattish price trend in 2023 at `387-390 per bag, it said.