Monsoon, Delayed Fund Allocation Impact Cement Demand In Sept: Report

The cement demand in September remained below market expectations due to heavy monsoons and region-specific challenges which impacted both trade and non-trade demand, highlighted a report by Axis Securities. The report noted that despite some improvement compared to the sluggish performance in July and August 2024, overall demand for cement failed to meet the anticipated levels.

The report highlighted several key reasons for this demand slowdown. One of the main factors was the delayed allocation of funds for infrastructure projects. This was despite the fact that cement prices were at their lowest in several quarters.

"The delayed allocation of funds for the infra segment, heavy monsoons, and region-specific challenges impacted both trade and non-trade demand, despite cement prices being at multi-quarter lows" said the report. Earlier as per the report the first quarter of the current financial year (FY25) was also challenging, with demand being affected by the general election, extreme heat conditions, labour shortages, and unseasonal rains in certain areas.

Historically, cement demand tends to moderate during election years. The report also cited provisional numbers from the Office of the Economic Adviser, which indicated that cement demand grew by 9 per cent in FY24. However, this momentum has slowed down in the current fiscal year, with channel checks showing only a marginal improvement in September compared to the previous two months.

Looking ahead, cement demand is expected to grow in the range of 5 per cent to 7 per cent in FY25. This growth will likely be driven by the government's focus on infrastructure development and continued activity in the real estate sector.

"Additionally, the higher budgetary allocation to infrastructure and construction in the 2024-25 budget is anticipated to lift the cement demand momentum in H2FY25" the report added. Furthermore, the increased budget allocation for infrastructure and construction projects in the 2024-25 budget is expected to boost demand in the second half of FY25.

The report also noted that the real estate market's projected growth, coupled with the government's significant housing initiatives like the Pradhan Mantri Awas Yojana (PMAY), indicates a sustained boost in cement demand. With the plan to build 3 Crore additional houses, this program aims to address both rural and urban housing shortages, promoting affordable housing for various income groups. (ANI)