Cement sector expected to grow over 10% in 2021: ACC

NEW DELHI: The domestic cement industry is likely to witness a growth rate of over 10 per cent in 2021 on account of demand revival, according to ACC Ltd. The government’s spending on big infrastructure projects and affordable housing schemes such as Pradhan Mantri Awas Yojana (PMAY) with enhanced budgetary allocations would be “primary drivers of growth” for the cement industry, it said.

The cement industry had witnessed a de-growth of 10-12 per cent due to the Covid-related disruptions.

“The outlook for the cement sector in 2021 is robust, with growth estimated at more than 10 per cent Y-o-Y over that in 2020,” ACC said in its latest annual report.

The demand revival is likely to be led by the north, east and central regions, it said.

“The primary drivers of growth will be infrastructure and affordable housing. Highways and roads, metro rail projects and dedicated freight corridors are expected to see increased levels of activity with sharply higher budgetary allocations in the next year,” it added.

The continued focus on affordable housing will also ensure healthy demand for cement in the coming year, said ACC, which is owned by Swiss building materials company LafargeHolcim.

While talking about the company, ACC said in the retail segment, individual home builders and ground plus three-storey buildings continue to remain its largest customer segment in terms of volume and profitability.

“With growing urbanisation and rural empowerment, the demand from these sectors is expected to accelerate,” said ACC in its Integrated Annual Report for the Financial Year ended December 31, 2020.

In 2020, ACC’s sales volume in cement sales de-grew by 11.6 per cent from 28.89 million tonnes in 2019 to 25.53 million tonnes.

The company, which follows the January-December financial year cycle, had reported net sales of Rs 13,487 crore in 2020.

ACC has an installed capacity of 33.05 million tonnes per annum (MTPA) and operates 17 cement plants and 9 captive power plants.

The cement industry had witnessed a de-growth of 10-12 per cent due to the COVID-19 pandemic. However, in the second half of 2020, the industry showed signs of early recovery, it said.

“Lockdown-led demand disruption was the highest in the second quarter of 2020 on the back of suspension of production, stalled construction activities and a mass exodus of labour,” it said.

However, starting early June, the pent-up and pre-monsoon construction requirement cushioned demand de-growth to a large extent.

According to ACC, rural demand continues to be the silver lining for cement consumption while that from the infrastructure sector was in a slower lane. This was led by agricultural profitability and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

“Infrastructure demand witnessed gradual pick-up from September onwards on the back of improving government spending, coupled with gradual normalisation in labour availability,” it added.

Moreover, the pandemic has led to slow down and delay in capacity expansion projects of the cement industry.

India is the world’s second-largest cement producer with a cumulative production capacity of 540 MTPA in 2020, it said.