India: 2012 outlook negative

With the Indian cement industry currently caught in a down-cycle, Fitch Ratings has said the 2012 outlook for the Indian cement sector is negative.

Moderation in cement demand and overcapacity are the main issues plaguing the sector at present. Fitch expects future activity in the real estate and infrastructure sector to remain muted given low credit growth, leading to cement dispatch volumes growth ranging from 2-5 per cent in 2012.

Cement volumes had been relatively stable until early 2011 as a slowdown in private sector construction activity was offset by government spending on infrastructure. However, a rise in interest rates moderated the growth in the real estate construction to 18.7% in November 2011, while a weakening of government finances may adversely impact infrastructure spending in 2012.

For the first-half of the current fiscal (FY11-12) the sector achieved growth of three per cent. Sales reached 104.43Mt compared to 101.16Mt during the previous corresponding period. Production, meanwhile, was 104.72Mt, up 3.2 per cent YoY from 101.48Mt.