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Hit on Cement Demand likely to be transient

Hit on Cement Demand likely to be transient

- by Vivek Patni, Director at Wonder Cement

One of the key drivers for the Indian Economy is Infrastructure. This sector is distinctly accountable for contributing to the overall economic development. Thrust to infrastructure development across sectors such as roads, railways, airports, ports, economic corridors, affordable housing, power, bridges, dams, roads, urban infrastructure development, health and education are identified as an important lever to generate growth and social well-being.

Infrastructure is important for increasing the country's economic growth and the integration of the Indian economy with other economies of the world. Predominantly, it creates over a million job opportunities each year. Research reveals that there are over 14 million people who have jobs in the field of infrastructure.

Cement is an extremely fine mineral which is manufactured with utter precision. In FY19, the cement industry achieved the highest growth, the capacity utilization had improved which led to its growth journey and utilization of approximately 70% was noted. During the beginning of 2020, that is January and February, we predicted it is going to be a great year for the growth of the industry which will eventually direct towards the economic growth of the country. However, global pandemic impacted every sector in one way or the other. Resulting in a slowdown of the country’s economic growth, thereby affecting the overall growth of the sector as well. Given the delayed infrastructure development due to the current pandemic, the cement and concrete industry has undergone a massive hit post the pandemic breakdown. However, this year the focus is to optimize the production cost and uplift the industry position in the market by delivering supreme quality products.

In FY20, we have seen a 7% increase in demand in the North, which was a boost to the infrastructure segment. However, the sector will gradually catch its pace. The biggest multiplier effect of the infrastructure thrust would be on job creation in sectors like construction. The investment-led growth has the potential to take economic well being into the deeper corners of the society.

Evolving infrastructure is likely to usher in a transformational change in India in the coming years - in the way people live, travel, work and do business. However, the sudden break to the construction business might have slightly affected the overall demand. Hence, the government had authorized the cement industry to restart their production, following all safety norms. Its consumption might remain vandalised due to the extension of the lockdown. All of this is likely to remain constant for a while and pick up gradually. One of the primary reasons for the same is that most laborer’s migrated back to their homes.

Monsoons come with a disruption every year since this is the time when construction is difficult to accomplish.

To understand it better, there is a system chain, where not just the traders but also the manufacturers have been facing trouble. As all the main markets are latched, traders are unable to stock the material or even pass it on to the dealers and other distributors, it has, therefore, been difficult to achieve a seamless supply chain cycle. Now for the cement industry, dealers have kept their shops closed. Multiple manufacturers have been unable to move the stock out. However, with sheer persistence and determination and a commitment to offering impeccable quality and service towards the respective stakeholders. I am sure as an industry; we will adapt to the new ways of working till normalcy is completely restored. As an ever-evolving industry, we have come together, adapted to new ways while using this time to reinvent and deliver, better and safer than ever.

With respect to the Union Budget 2020, the government had announced a substantial investment outlay. The government has the vision to invest ₹ 100 Lakh crores in infrastructure over the coming five years.

The high - level task force's final report states that with projected infrastructure investment of ₹ 111 lakh crore during 2020-25. There are multiple such projects worth approximately ₹ 15 lakh crores that have been identified. Along with these, there are multiple such projects initiated by the government, with the materialization of these investments, we will experience a noticeable impact in the infrastructure sector.

I strongly believe that every upheaval presents an opportunity to push oneself and shine brighter. With all of us coming together, the government, manufacturers, dealers and traders, the journey towards success will be faster and easier.

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