>KEY DEMAND DRIVERS IN THE CEMENT SECTOR(DHANLAXMI BANK)

MAIN HIGHLIGHTS


► Cement Sales Growth Eases, But Prices Firm
► Surplus Capacity, Output Under Check
► Clinging On To High Prices
► Cost Pressures Remain
► Consumption To Rise At Slow Pace Despite Healthy Demand
► Cement Companies Hold Prices, But Excess Capacity A Worry


Demand in the current financial year slowed in April-December as major demand drivers grew at a moderate pace.Key demand drivers in the cement sector include:
■ Housing sector: It accounts for a large portion of domestic demand. Rise in urbanisation, an increasing number of house-holds and higher employment are primarily driving demand for housing. However, uncertainty about future incomes, rising interest rates and firm real estate prices have restrained conver-sion of latent demand into actual purchases. This has led to weakness in fresh investments in housing.


■ Infrastructure development: Emphasis of the government on development of dedicated freight corridors, upgrading and building of greenfield airport projects and ports were expected to drive consumption. But this has not happened because of slow pace of execution of infrastructure projects.


■ Industrial projects: Slowdown in the economy, policy uncertainty, high interest rates and weak global economic outlook have resulted in companies holding back their capital expenditure plans.


■ Commercial construction: Construction of retail outlets, office space, hotels, malls, hospitals and schools grows as the economy develops. Demand for consumer-centric sec-tors — such as, automobiles, consumer durables and fast-moving consumer goods — have been impacted due to high inflation, high interest rates and uncertainty in in-comes. This has led to fall in demand for retail space and malls. Rising costs are also affecting the hotel industry, thereby resulting in hotel expansion slowing down.


To read the full report: CEMENT SECTOR
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