India: slight fall in utilisation expected

India: slight fall in utilisation expected
Published: 17 January 2010

Though 30Mt of capacity in India is (around 12%) is expected to be added in the calendar year 2010 to the existing total capacity of 242Mt, the rise in the despatch figures has brought cheers to manufacturers and analysts alike.

HM Bangur, managing director, Shree Cement, said, “This year, we expect a growth of 9-10% in comparison to the world growth rate of 1-2% in the last year. The average growth rate globally is around 3-4%, and in comparison we are in a better position. This year 30Mt would be added on the base supply. We are expecting a demand growth of 10% and supply growth of 15%, and normally 5-7% excess capacity is healthy for the industry.”

The total cement capacity in the country grew by more than 15% in 2009 to 242Mt from 205Mt in the previous year. South India, which has 40% of the installed capacity, is seeing price surge for the last two fortnights. While the Commonwealth Games is boosting demand in the North, industrial demand is increasing the traction in the East. Roads and highway development is helping the West.

Though cement players are not hindered by oversupply, they say the industry utilisation rate currently at 85% will reduce to 80-82% going forward.

Bangur said, “The utilisation would remain around 80-85% in general. Prices will remain constant till June-July, after that there would be a movement depending upon the market scenario.”

Rupesh Sankhe, research analyst, Angel Broking, said, “Most of the capacity has been added in the last six months, with an utilisation rate at around 40-50%, which will come in full force this year. In December prices rose but there was no offtake from the residential end-user. The month saw cement consumption from road, power projects, infrastructure and highways. In April-May, most of the new capacities would run at 70-75% utilisation.”