Cement Demand Growth to Moderate to 5-6% in FY25: CareEdge Ratings

The cement sector is projected to see demand growth moderate to 5-6% in FY25, down from 8-9% in recent years, according to CareEdge Ratings. This slowdown is attributed to a high base effect and softer demand driven by general elections, extended monsoon, and sluggish infrastructure activities in the first half of the fiscal year. Additionally, the festive season and construction bans in northern India further impacted demand in October and November.

Despite these challenges, demand is expected to pick up from December, enabling the sector to achieve the projected growth rate. Between FY22 and FY24, the cement sector recorded exceptional growth with a compound annual growth rate (CAGR) of 13.4%, driven by housing, pre-election infrastructure push, and a low base effect post-COVID-19.

CareEdge Ratings forecasts a GDP growth rate of 6.5-7% in FY25, with cement demand to GDP multiplier projected at 0.7x for the year. Long-term projections include a CAGR of 6.8-7.2% in cement demand and 5-6% capacity growth between FY25 and FY30, supported by government spending on infrastructure and housing.

Housing remains the largest contributor to cement demand, accounting for 55-60%, while infrastructure contributes 30%, and industrial demand accounts for the rest. Infrastructure’s share is expected to grow to 33-34% in the coming years due to the government’s focus on initiatives like PM Gati Shakti and increased allocations for roads, railways, and airports. Projects under Bharatmala, which target 34,800 kilometers of road development, are expected to boost demand, with 50% of this target yet to be achieved by March 2024.

Sabyasachi Majumdar, Senior Director at CareEdge Ratings, stated, “Despite challenges, the sector’s long-term outlook remains robust, with housing and infrastructure driving demand. Government-backed initiatives like Pradhan Mantri Awas Yojana and urbanization will sustain momentum.”

The sector is also set to benefit from the government’s push for real estate development, enhancing connectivity, and boosting urbanization. Increased infrastructure outlay is expected to have a multiplier effect, strengthening the sector’s growth trajectory.