Cement production has fallen 22 per cent in the first seven months of this fiscal to 148 million tonnes (mt) against 189 mt logged in the same period last year, largely due to the production disruption caused by the outbreak of Covid-19, in April.

Cement companies had managed to produce only 4 mt in April, against 29 mt in the same period last year.

Outbreak of the Covid-19 pandemic had forced the government to announce a nationwide lockdown beginning March 25. The nationwide lockdown had come at a time when construction activity was at its peak.

Notwithstanding the current challenging times, large cement companies such as UltraTech Cement, Ambuja Cement, ACC and JSW Group-owned Shiv Cement are betting big on future growth, lining up investments worth ₹7,800 crore over the next three years.

Also read: Cement majors commit big money to capex, signalling infra revival

Most companies are targeting to retain the cost efficiency achieved during the Covid-19 period and cut costs further, going ahead.

Capacity utilisation of domestic manufacturers has been around 47 per cent in the seven months ended October, as units have been operating at sub-par capacities along with staggered shifts. However, it is up from 45 per cent in the first half of this fiscal.

However, production in October was at 27 mt, against 24 mt logged in November and 21 mt registered in October.

Amidst the pandemic, cement consumption is growing strong in the rural, semi-urban and retail markets. Over the months, cement demand is being driven by rural India due to better availability of labour and increase in construction of rural infrastructure and low-cost housing.

As the economy is getting unlocked, demand for cement has begun gaining traction, with most regions reporting decent growth and construction activity picking up pace, said a report by Care Ratings.

Cement demand, which has been particularly tepid in metros/tier-1 cities, too is recovering in a calibrated manner, it said.

Real estate markets in tier-1 cities have been opening up, albeit at a slow pace, but is gathering good traction as consumers look to buy their own space or move into a larger space.

Also read: Demand pushes up cement price

Cement demand for low-cost housing is showing green shoots. Cheap housing loans and the need for space are also spurring some demand, said the report.

Despite the fall in demand and production, operating profit margin of cement companies has increased to 26 per cent in the first half of this fiscal from 22 per cent in the same period last year.

Overall expenditure has fallen by a sharp 15 per cent in the first half of this fiscal, mainly on account of supply chain management, contract renegotiations, third-party spends and fuel efficiency.