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Every month, the cement manufacturers association shares the industry’s volumetric sales for public consumption, and every month the market expects demand will rebound on the back of an improving macroeconomic environment. Dispatches meanwhile have only continued to decline from their peak in FY21, offering little to fuel any optimism.

Cement that feeds directly to the construction industry—that largely includes public and private housing projects, commercial buildings, and infrastructure, transport, and energy projects funded by the government—is the single biggest indicator for how demand fares in construction and real estate. In aggregate terms four months into the fiscal year, domestic demand has slid 15 percent, leading to an overall decline of 8 percent; exports proving to be a saving grace for the industry as they aim to maximize their utilization. Despite exports growing 31 percent within the span of the year, the industry that massively expanded capacities in FY23, only managed to utilize 53 percent of its capacity.

For consumers, soaring cement prices—already weighed down by inflation—are pushing up construction costs. Those whose wages have not kept pace with inflation have undoubtedly delayed major purchases, particularly homes and home construction, in the absence of a functioning mortgage market. Meanwhile, burgeoning urban areas are dotted with partially completed buildings, waiting for investors to finance their completion, but finding them absent in a risky and uncertain market. Infrastructure projects have seen their deadlines pushed back by years, as they struggle to absorb cost overruns and navigate a host of administrative and political challenges. At the same time though, because of the strong retention prices and cost controls, cement companies have managed to keep making profits in this demand drought.

During FY21, the government’s efforts to stimulate the real estate and construction sectors, including the announcement of massive housing subsidies, led to cement plants operating at maximum capacity to meet the overflowing demand. However, that boom was short-lived. In fact, while a 15 percent year-on-year decline in domestic demand for 4MFY25 seems significant, it pales in comparison to FY21. Volumes since that peak have fallen by a substantial 27 percent in the domestic market.

As companies scramble to sell their excess cement abroad, many, particularly in the south, are finding success. In 4MFY25, they have grown a substantial 31 percent; but by no means, this is the highest cement exports the industry has achieved. Average monthly exports during FY25 thus far stand at roughly 800K tons; lower than FY21’s million tons. Companies cannot rely on exports as a dominant source of demand (and revenue) as they tend to be sensitive to geopolitical skirmishes, freight costs, and dollar-rupee parity. In any case, at prevailing domestic prices, cement companies are only exporting out of necessity, Evidently they have to try harder. With winter approaching, an even slower growth in domestic demand, particularly in the north is imaginable. In the south, ongoing infrastructure projects may keep churning. It would not be premature to expect FY25 to be decidedly average for the industry.

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