More output not to dampen cement prices

The possibility of a fall in cement prices in the near future looks like a remote possibility, with additional cement production and despatches in the last six months evenly balanced, leaving the inventories with producers unchanged.

Cement production in the April-September period increased 8.4 per cent to 80.85 million tonnes (MT) from 74.58 MT last year due to new capacity additions and higher capacity utilisation.

Interestingly, the despatches (including exports) have also jumped by 8.19 per cent to reach 80.24 MT, indicating that there is no stock piling and whatever quantity that was produced, has got absorbed. Therefore, companies have not seen any pressure on cement prices that have remained firm.

Due to the buoyant domestic demand, cement exports have also slipped by about 43 per cent, from 3.25 MT to 1.84 MT in the same period.

Industry leaders are not worried about the capacity additions and expect a rising demand in coming years. "India has enormous potential for growth, given the per capita consumption of only 136 kg against the global average of 356 kg.

The rise in per capita consumption will be fuelled by the strong growth in the housing sector and government's thrust on infrastructure development", O P Puranmalka, group executive president and chief marketing officer, Aditya Birla Group (cement) said last week.

The fact that cement imports from Pakistan are also taking place shows that the demand is still exceeding supply even with the new capacity additions, said an industry official.

The cement industry has added 6.35 MT capacity in the first two quarters of the current financial year.

With this, the country's total capacity has moved up from 166.73 MT to 173.08 MT, an addition of 3.80 per cent, according to the Cement Manufacturers Association. Capacity utilisation has also increased to 94 per cent from 90 per cent in the corresponding period last year.

Among the companies that have added capacities include Ambuja Cements (2 MT), Vasvadatta Cements (1.65 MT), Shree Cements (1.5 MT) and My Home Cement Industries (1.20 MT).

The industry has announced a capacity addition of over 100 MT to meet the rising domestic demand. Analysts, however, are of the view that of this only 70-80 MT would materialise in the next two-three years. Industry sources estimate capacity addition of another 7-8 MT by the end of current financial year.

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ADDING BULK

Total cement capacity in the country moves up to 173 million tonnes as the industry invests in expansion in the first six months of 2007

million due to capacity additions and higher utilisation

Thanks to buoyant domestic demand, exports slip by about 43% to 1.84 million tonnes