ICRA believes that due to the slowdown in construction activities during the general election in the first quarter of fiscal year 2025 and the impact of strong monsoon rains in the second quarter on the growth of cement production in India, which is slower than expected, it has slightly revised its forecast for the growth of cement production in fiscal year 2025 from 7-8% released in July 2024 to 4-5% year-on-year. Up to 445-450 million tons. (India's fiscal year runs from April 1 to March 31 of the following year).
Figure 1: ICRA predicts that India's cement production will grow by 4-5% to 445-450 million tons
in fiscal year 2025 Source: Cement Big Data (https://data.ccement.com/)
Although the growth rate of cement production has been lowered, However, ICRA believes that India's cement demand in the second half of fiscal year 2025 is still optimistic. In the first half of fiscal year 2025, India's cement production increased slightly by 2% to 212 million tons. Agricultural cash flow is likely to improve as monsoon rains ease, boosting rural consumption in the second half of the year and driving cement demand growth in the rural housing sector. In addition, the Indian government's infrastructure expenditure in the first half of fiscal year 2025 is 4.0 trillion rupees, and the revised budget for the whole year of fiscal year 2025 is estimated to be 11.1 trillion rupees. There is enough room for capital expenditure in the second half of fiscal year 2025 to provide greater impetus for infrastructure growth, which may stimulate construction activities and cement-related industries.
ICRA expects the profits of Indian cement companies to begin to recover in the third quarter of fiscal year 2025. This is driven by higher infrastructure capex and improved construction activity, which is likely to drive cement production and prices up simultaneously, and relatively stable input costs (power and fuel) (coal and oil costs were down 38% and 13%, respectively, in the first half of fiscal 2025).
In addition, ICRA estimates that India's cement and clinker production capacity will increase by 70-75 million tons per year in fiscal year 2025 and 2026. In fiscal year 2025, it will increase by 33-35 million tons per year (32 million tons per year in fiscal year 2024), and in fiscal year 2026, it will increase by 37-39 million tons per year. It is expected that the eastern and southern regions will continue to lead the expansion, with a total of 38-40 million tons of new annual capacity, accounting for about half of India's total. Capacity utilization in FY2025 will remain at 70% after expansion (70% in FY2024).
