Cement sector: What are the key challenges?

Cement industry currently faces multiple challenges both internal and external. On one hand, demand is moderating especially in the North region and muted to negative growth in Southern region, industry is also facing higher input and fuel costs.

The situation was also aggravated due to hike in diesel prices, making transport cost (freight) dearer. With low demand in over supply regime, industry is unable to pass on the higher costs to end user thereby keeping their margin under pressure or voluntarily opt to keep volume low. Given the backdrop of Government thrust to accelerate economic growth, industry expectations are high to reduce excise duty on cement which in our view is unlikely.

With country's GDP pegged to grow more than annually going forward, cement industry is likely to grow in double digit over long term and outlook for demand remains positive.

With a view to have inclusive growth of all sectors, emphasis would be to create demand for real estate sector with focus on affordable housing, government led higher infra spending in the form of higher fund allocation and incentive for public private partnership (PPP) to keep robust demand for cement.