According to a recent analysis by financial services provider Moody’s Corporation, India’s demand for building materials is expected to rise in the years to come as the country experiences rapid economic expansion.
On the other hand, despite strong demand for infrastructure improvements, Australia’s project execution is projected to be limited by capacity restrictions, while China’s building property sector is expected to slow down.
India’s increasing demand is a result of the country’s growing population, housing needs, urbanisation, and significant infrastructure expenditures.
Specifically, the demand for cement is expected to rise at a compound annual growth rate of 5 per cent through to the end of the decade.
By 2030, domestic installed capacity is anticipated to rise by a third; however, even at that point, growth in manufacturers’ profitability will be constrained by fierce rivalry, industry oversupply, and high energy costs.
The property sector’s structural deterioration is the primary cause of China’s extended industry collapse, according to the report. Overcapacity also impedes industry recovery, with excess supply and idle capacity lowering profitability.
Moody’s also believes that supply and demand are unlikely to normalise quickly as excess capacity will take time to deplete.
Despite weakness in residential construction within Australia, public infrastructure construction will support the demand for building materials.
Australian state governments’ large infrastructure construction spending pipelines and strong stream of potential workflow will require a substantial amount of building materials.
The report highlights that “companies like Infrabuild Australia Pty Ltd, BlueScope Steel Limited and Boral Limited stand to be key beneficiaries of the strong work pipeline”.
However, many of these projects are experiencing capacity constraints, cost escalations and labour shortages, which threatens a risk of delays that could weigh on demand for materials.
Moody’s expects rated issuers’ revenue to grow in the next 12 months, despite challenges in individual markets.
The report stated: “Most issuers are leaders in their respective markets so they are better positioned to cope with demand and supply fluctuations. Rated issuers in China will gain market share from smaller, less competitive players, and expand their product and market coverage, which will offset the negative impact of weak demand.
“India’s UltraTech Cement Limited will add around 70 million tonnes of new capacity, taking its overall capacity in India to 200 million tonnes by March 2031, to meet domestic demand.”
According to Moody’s, rated issuers in China will counteract the negative effects of the poor market by growing their market share and broadening their product and market coverage.
China’s revenue growth is expected to be driven by the expansion of non-cement building material businesses and overseas projects.
