Mining, construction equipment industry may grow by 15-20% in 2021: ICRA

ICRA said the mining and construction equipment industry is likely to grow by 15-20 per cent in the calendar year 2021


Mining industry | ICRA

ICRA on Wednesday said the mining and construction equipment industry is likely to grow by 15-20 per cent in the calendar year 2021 but stressed that the economy, in the grip of a pandemic, could throw up sudden negative surprises.

The first quarter of 2021 is estimated to have reported a strong equipment demand growth of 45-50 per cent, ICRA said in a statement.

“Following a 10-12 per cent contraction in CY2020, dragged down primarily by the 39 per cent decline in H1 CY2020, the mining and construction equipment (MCE) industry is poised to grow by 15-20 per cent in CY2021 (5-10% in FY2022),” it said.

However, the economy in the grip of a pandemic could throw up sudden negative surprises, as witnessed in April 2021, when demand was relatively subdued.

While overall equipment demand will be strong in 2021, partly due to the low base of 2020, volatility in demand is likely, with a strong first quarter, a relatively subdued second quarter in the grip of the second wave, and the emission related pre-buy pick-up and post-buy slump in the third and fourth quarter of 2021.

While the second wave throws up challenges, particularly in the manpower-intensive construction sector, ICRA said that it expects a better prepared ecosystem, buffered by ample liquidity to limit stoppage of work, provided the lockdowns are limited to a relatively narrow window and are more localised, preventing a massive wave of reverse migration.

“Support to ICRA’s equipment demand estimates originates from – the GoI (Government of India) continuing its Build India’ momentum to counter the economic slowdown and the ample liquidity in the ecosystem. Tailwinds from any pick up in state capex, compared to the pullback in FY2021, and strong construction activity picking up in other sectors like ports, metros, and airports, could aid demand.

“On the contrary, demand can be hit by the Covid second wave restricting mobility and equipment utilisation for a prolonged period, which in turn could result in an increase in delinquencies and lender pull-back and a likely equipment price increase of 5-10% for the emission norm change,” Pavethra Ponniah, Vice-President and Co-Group Head, ICRA said.

Dealer checkpoints predict a more subdued 0-5 per cent volume growth in FY’22 against ICRA’s expectations of a 5-10 per cent volume growth.

That said, given the current uncertainty in the market, following the huge surge in COVID-19 cases in the recent weeks, ICRA believes that ground touch points are heavily clouded by the immediate term.

Continuing with the 15-20 per cent growth expected in 2021, ICRA said that it expects demand growth to sustain in 2022 and 2023, before declining in 2024 pre-and post-the general elections during April-May 2024.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor