Indian cement consumption increased 11 per cent in the first quarter of this financial year over the same period last year.
This figure was achieved despite the southern region – the largest cement market in the country – recording only a four per cent increase during the period under review.
Industry players say that the additional cement capacity that came on stream in 2008-09 has been absorbed by the market, indicating that demand continues to be robust. They anticipate sales to pick up further once the Government spending on infrastructure projects, as outlined in the Budget, gathers momentum.
In this context, the players do not anticipate any pressure on prices for the better part of this financial year apart from due to seasonal variations in demand.
The industry expects another 20-25Mt of capacity to be added this year, but in a staggered fashion giving enough time for the market to absorb the additional capacity. A bulk of this capacity is likely to go on- stream in the last quarter of the financial year.
Addressing journalists while releasing the company’s fourth quarter and 2008-09 results last month, Mr N Srinivasan, vice-chairman and managing director of India Cements Ltd, said: “this year also we will be okay [in terms of demand].” The market had absorbed the additional capacity that came on stream during the year and a bulk of the capacity addition this financial year was likely to happen in the fourth quarter.
Andhra Pradesh, which is a large market in the southern region, saw near flat sales during the first quarter of this financial year – at 4.42Mt compared with 4.41Mt in the first quarter of the previous financial year.
The industry attributes the flat consumption in Andhra Pradesh to the elections, because of which a number of Government projects were held up. The Andhra Pradesh Government has initiated a number of projects such as low-cost housing and irrigation schemes. Now that elections are over, the projects should take off, said Mr Srinivasan.
Mr A.V. Dharmakrishnan, Executive Director – Finance, Madras Cements Ltd, felt it was a matter of time before cement demand picked up in Andhra Pradesh, which would result in the southern market getting back to healthy double-digit growth figures.
Mr Vinod Juneja, Managing Director, Binani Cement, said sales in the first quarter were aided by the delayed monsoon, because of which cement purchases continued till June end, at least in the western and northern regions. Besides, large infrastructure projects were taking off across the country and with the Government promising higher outlay for infrastructure projects, consumption should continue to be good.