JK Lakshmi Cement today said the demand for cement was likely to grow by 8-9% in the current fiscal, but the price of the building material will remain stable in the absence of any pricing war.
"The demand for cement grew by just 5% in the last fiscal compared to 12% in the previous one. It is likely to grow by 8-9% this fiscal," JK Lakshmi Cement whole-time Director Shailendra Chouksey said.
The demand growth will stem from the government's increased spending on infrastructure, particularly in the terminal year of the current Five-Year Plan (2007-12), and a spike in demand for housing, mainly in rural areas, he said.
However, he added that last fiscal's subdued demand due to low housing activity and the slow pace of development of the country's infrastructure as a result of the prolonged monsoon was expected to impact cement demand in the first quarter of the current fiscal as well.
Elections in various states also hampered demand for cement, he said.
Coupled with poor demand and increased capacity addition, cement makers' plant utilisation plummeted to just 76% last fiscal in the western and northern regions, where JK Lakshmi Cement primarily markets its product.
Cement players in India added a capacity of 42 million tonnes per annum (mtpa) in 2009-10 and 29 mtpa in 2010-11, taking the industry's installed capacity to 290 mtpa.
Chouksey said that though 2010-11 capacity addition was less in comparison to the previous fiscal, the "effective capacity addition" was nearly 40 mtpa in the last fiscal, as a lot of the capacity addition projects implemented in 2009-10 only came onstream in 2010-11.
"This impacted the demand-supply balance in 2010-11," he said.
On cement prices, Chouksey said the price of the building material would remain stable in the current fiscal as raw material prices had reached their peak and the price war, mainly fanned by the industry's new entrants, is nearly over now.
The average price for a 50-kg bag of cement is around Rs 254 in the country at present. Being a regionally traded commodity, cement prices differ across regions.
