Mumbai, Jan 3 (PTI) The lingering sand shortages andslowdown in real estate activities will leave cement companieswith a muted volume growth in the current financial yearending in March, while the next fiscal year may see demandpicking up steam with around 5 per cent growth, says a report.On the demand front, based on the current trends,cement demand is expected to show a very thin growth of 1-2per cent in FY18 and show a modest recovery only from theMarch quarter, rating agency Icra said in a note today."A pick-up in affordable and rural housing segmentsand infrastructure, including roads and irrigation projects,is likely to improve cement demand to grow 4-5 per cent inFY19. However, capacity overhang and moderate demand willcontinue to keep capacity utilisation levels between 60 and 65per cent over the medium-term," it said.Cement demand remained weak in the first seven monthsof the year due to sand shortage, slowdown in real estateactivities, drought (in Southern states) and transitionalissues related to the rollout of the Real Estate RegulatoryAuthority Act and goods and services tax, the report said.The report also warned that higher prices of pet coke,coal and diesel could put pressure on margins and debt metricsof cement companies in the coming quarters.Cement companies have experienced rising energy andfreight costs on the back of higher pet coke, coal and dieselprices in the first half of the fiscal 2018, it said, addingmost of the large cement companies (barring the South-basedones) passed on the rising costs."Pet coke prices rose around 32 per cent in the first half. This, along with a 44 per cent jump in coal prices resulted in higher power and fuel expenses in H1 and the 7 per cent spike in diesel prices lead to higher freight cost for companies. All these put pressure on the operating profit H1.

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