As production increases, prices fall

According to data provided by the Cement Manufacturers' Association, cement production in India rose by 7.9% in the last fiscal to 181.61 million t. In the first half, cement output grew 12% to 96.73 million t from 86.36 million t a year ago, while consumption rose by 11.68% to 94.77 million t, from 84.86 million t. During the April to September period, installed production capacity grew by 11.65 million t, of which 7 million t was from new projects and 4.65 million t through expansion. The installed capacity at the start of this fiscal year was 219.17 million t and it reached 230.82 million t by September 2009.

Adding capacity

The industry has added some 60 million t of capacity in the 11th five-year plan period till August 2009. To meet the growing demand of cement, there are plans to further increase capacity and 298 million t by 2011 - 12. The industry is expecting higher growth in production and sales this fiscal as a result of the government’s investment in infrastructure development.

H M Bangur, Managing Director of Shree Cement has said that around 30 million t of capacity has already come on-stream this year and the trend is likely to continue for the next three years with around 30 million t capacity being added every year. Ambuja Cements Ltd reported that October shipments rose 3% to 1.464 million t from a year earlier, and that production rose to 1.498 million t from 1.451 million t.

Falling prices

However, as a result of the increase in production this fiscal, it has been reported that cement prices across the country have witnessed a fall of 5 – 10% in the last two months. This has been especially true for western and southern India, where a large amount of new stock is still arriving and non-trade prices have been cut by 20 – 30% to Rs.160 - 180 a bag. ACC Ltd has announced shipments in October fell marginally to 1.69 million t from 1.7 million t a year ago. The company also said that production fell to 1.71 million t from 1.74 million tonnes a year ago.

Andhra and Karnataka have seen huge capacity additions recently, which have led to a drop in prices there. About 20 million t capacity is estimated to be added in the next two years in these states. Sources say that players here are trying to enter the western Indian market and are quoting a lower price to gain market share. In addition, capacities that were commissioned in the last financial year, which had been operating at 48 – 50% utilisation till now, are now stabilising and this has also contributed to an oversupply of cement in the market.

The total capacity of the country is some 220 million tpa and by 2012, it is estimated to reach 298 million tpa.

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