India’s largest cement maker, UltraTech, said on Friday oversupply would continue to plague the 300-million tonne industry for another 24-36 months.
Its chairman, Kumar Mangalam Birla, said, “We will see excess of supply (cement) for the next two-three years and prices are likely to remain subdued unless we have catch-up in demand with capacity.” He was addressing shareholders at the company’s annual general meeting.
Last year, industry players had anticipated the oversupply situation to continue for 18-24 months. Considering the decade’s worst demand in 2010-11 and analysts’ expectations of a repeat of the same in this financial year, it’s a signal that the cement industry’s long wait to see a dawn may get prolonged. “The overcapacity continues to plague the industry,” said Birla.
The domestic cement industry, the world’s second-largest after China’s, has added 100 mt of fresh capacity over the last two years.
“We expect the oversupply situation to easily prevail till the first quarter of 2013-14,” said a Mumbai-based analyst, adding cement players would attempt to curtail capacity utilisation to ensure less supply to the market.
For this financial year, Birla said, demand was expected to be of 228 mt, while capacity would be 291 mt. “There will be an excess of 63 mt of capacity in 2011-12,” he said.
Though the last two years saw rapid capacity addition, Birla anticipated it would slow down in the coming years.
“There will be an addition of 100 mt in the next five years,” he said. UltraTech has an 18 per cent market share. It’s capacity stands at 52 mt, which will increase to 61 mt by the June quarter of 2013-14.
UltraTech will spend Rs 11,000 crore over the next three years to expand its major projects. It plans to reach an overall capacity of 75 mt. Birla said the company was exploring both organic and inorganic routes to strengthen its position in India. “Over the long term, the cement sector is likely to grow in excess of 8.5 per cent,” he said. On the Bombay Stock Exchange, UltraTech shares closed weak at Rs 1,087.70, down 2.47 per cent.
