The domestic cement market will see oversupply in the second half of this year, says ACC, the country's largest manufacturer of the product.
In its annual report, the Holcim group company said, "Although cement prices may be reasonably stable, the bunching of fresh capacity, particularly in the second half of 2009, could cause a supply overhang."
Overall domestic capacity is 207 million tonnes and an addition of 46 mt is expected in 2009. ACC’s own capacity will rise from the current 22.63 mt to 30.58 mt by 2010.
Industry analysts says demand will remain better than expected till May-June, and so will prices.
However, notes ACC’s report, "Across the country, planned capacity additions have started to come on stream. The additional capacity, coupled with slowing demand, will potentially bring down capacity utilisations."
The Cement Manufacturers Association says the industry's capacity utilisation dropped to as low as 86 per cent during the April-January period. It was 93 per cent in the corresponding period last year.
Demand in 2009 will largely be driven by the pass-through effect of the stimulus packages announced by the government for the housing and infrastructure sectors, said the company. It adds: "While urban demand has slackened significantly, semi-urban and rural demand in the housing sector still show some robustness."
To harvest consumption demand in these areas, ACC will bolster the distribution network and its brand in these regions.
On the Bombay Stock Exchange, the company's stock prices closed at Rs 562.20 on Friday, up 3.92 per cent.
