Cement set for a hard grind
Cement demand in India could fall sharply by up to 20-25 per cent in the current financial year if the Covid-19 pandemic is not contained by May, and construction activities begins only in the second quarter, Crisil said on Monday.
The rating agency on Monday said with the domestic economy grappling with lockdowns, factory shutdowns, a fall in discretionary spending and delayed capex cycle, construction activity would be affected, thereby denting cement demand.
Crisil made this forecast on the basis of two possible scenarios based on the spread and containment of the pandemic.
Assuming that lockdown and other social distancing measures will continue till April-end and construction activity may resume in mid-May, the agency noted that the fall in demand during the fiscal could be 10-15 per cent.
However, if the country is unable to control the spread of the virus (and social distancing measures are extended till June) and construction activity begins only in the second half of this fiscal, the damage to the sector would deepen by 20-25 per cent.
According to Crisil, on a quarterly basis, cement demand would be a washout in the first quarter of this fiscal, given that the lockdown measures across India would hurt construction and demand will pick up only from the second half of this fiscal.
As government funds are diverted towards health and public welfare, its capex spend on construction projects, which account for 35-40 per cent of cement demand, will be significantly lower during the fiscal.
Besides, further weakening of the real estate sector will impact capex spends and in turn demand for cement, it added.