India is waiting for the "New Deal"
Nearer home, our cement sector is down but not out. True, demand has taken a hit, but the industry being conservatively and prudently managed, is generally strong enough to take the hit and bounce back with deep cost cutting measures and price improvement initiatives. Since this industry is not a stranger to cyclic ups and downs, the producers are quite adept at dealing with demand shocks. A veteran industry leader was quoted recently that the demand for cement in August was higher than the demand in the same month last year. He added that the demand for the rural segment and the Government projects are strong, but the real estate market is slow. I am not sure if this statement hides more than it reveals, in the sense that it may more eloquently qualify the low demand of August last year rather than highlight a spirited demand spurt in August 2020.
A kind of soft contrast to this view, is offered by Care Ratings in their Core Sector Report (which we in ICR religiously follow) for August 2020. The report reports a degrowth of -15 per cent in August 20 v/s a decline of -5 per cent in August 2019 for cement despatches, with overall Apr to Aug 2020 period reporting a shrinkage of - 28 per cent, which is consistent with other indicators.
So, a new deal is what the economy is crying for, and surely, the cement industry can gain from such a set of broad-based impetus measures. No "New Deal" can happen without infrastructure, housing and construction, and cement is the key to all.