The lagged impact of the cash crunch and polls in five states will take a toll on cement production in the fourth quarter of fiscal year 2017, says India Ratings and Research.
Latest data shows cement volumes in February 2017 declined the most in over a decade by 15.8% year-on-year (YoY). Volumes have declined by 5% month-on-month.
India Ratings notes that the decline in cement growth is also on account of a high base last year; during January-March 2016 cement production grew by 9.2%, 13.5% and 11.9% year-on-year respectively. India Ratings estimates cement production will be muted in 4QFY17.
On the prices front, the wholesale price index of grey cement and slag cement has shown a softening trend through November 2016-Janaury 2017. Cement players got some respite on the cost front, with pet-coke and coal prices showing moderation in January and February 2017, after pet-coke prices almost doubled since March 2016.
Volumes of pan India cement players in 3QFY17 contracted by 5% YoY, while for central and north based players fell by 3% and 6% respectively. The southern region, in contrast, showed strong volume growth of 21%. Growth in the southern region is led by an increased in government expenditure in the state of Andhra Pradesh and Telangana.