Millennium Post

Covid-19: MCE sector to suffer volume decline of 20% in 2020

New Delhi: The COVID-19 disruption has also dented the prospect of recovery of the mining and construction equipment (MCE) sector this year with the industry expected to suffer a volume decline of over 20 per cent in the current calendar year (CY), rating agency ICRA had said in a report.

The fall in volume is expected primarily due to severe loss in sales in the months of April and May and an overall weakness in the economy.

As per an ICRA note, during Q1 CY2020, the industry reported an over 23 per cent volume decline, with volumes in March '20 falling by 50 per cent. The same continued to contract in April and May 20 too before reporting a surprising pick-up in June 20.

Given this situation, the MCE industry is expected to suffer a volume decline of over 20 per cent in CY2020, due to two months of lost sales and an overall weakness in the economy, the agency said.

"The MCE industry witnessed some demand recovery in June 2020 after a prolonged downturn, driven mainly by rural demand for construction equipment (CE). It was found that rural demand has been up with vehicle utilization levels and had been trending up since May 2020 led by agriculture, irrigation, canal clearing and mulching activities. However, while the revival during the month of June is no doubt a positive sign, it is in no way conclusive; the same has to be sustainable in the near to medium term and much will be contingent on the underlying economy and headroom for infrastructural spend," said Pavethra Ponniah, Vice President and Sector Head, ICRA.

After three strong years and the industry volumes peaking at about 94,000 units, CY2019 saw the industry volumes fall by 16 per cent. Plagued by tight liquidity conditions, delayed payment to contractors and an overall slowdown in Government spend on infrastructure activity, MCE volumes have witnessed a sharp contraction since December '18. Partial recovery was visible from December '19 with some relief on payments and Government spending, however, the lockdown from March '20, disrupted this growth momentum.

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