The woes of the cement industry are likely to continue as prices are likely to weaken during the remaining period of the current fiscal on the back of highest ever capacity addition by the industry in a single year.
"(Cement) prices are expected to weaken across cities October-March 2009-10 because the industry will add another 30Mt of new capacity," Centre for Monitoring Indian Economy (CMIE) said in its October review.
The industry commissioned 18 mt of fresh capacity in the first half of the current fiscal and with that, the installed capacity of the country was likely to touch 276Mtat the end of March 2010.
This year the capacity addition would be the highest ever by the industry in a single year.
"Given that cement consumption was 177.8Mt in 2008-09, this additional capacity will put pressure on the utilisation levels and consequently, cement prices," CMIE added. It will also put pressure on the realisations of companies.
Cement prices fell across the country in September despite a strong demand. In the southern region, where most of the new capacity came up, prices tumbled by INR7-24/bag of 50kg. The West and the East saw an average fall of prices by INR2/ bag.
The North was the only region where prices remained firm due to the upcoming Commonwealth Games in 2010. The demand for cement in this region would remain strong which would restrict the price fall, CMIE explained.
The cement production grew by a robust 13 per cent during the April-August period of the current fiscal.
"With the Government’s huge thrust on building infrastructure and a revival in the real estate sector, we have revised our cement production growth forecast for 2009-10 to 13.8 per cent, as against nine per cent earlier," CMIE said.