Despite a drop in demand from housing sector and a general slowdown in industrial activities, the cement companies are optimistic about 9% growth in demand over the next two years, according to a report in the Financial Express of India.
Delays in commissioning of new capacities as well as hiccups in commencing commercial production of new capacities are expected to drive the demand. Moreover, the new capacities will take some more time to operate at 90% capacitiy utilisation, which will keep the growth momentum on for companies, said Emkay Research in its latest survey on cement sector.
Estimates of new cement capacity addition over the next two years are not consistent across industry players. There is a significant difference among the players on the highest and lowest capacity addition per year over the next two years, which in turn will hamper the actual supply of the commodity, the survey said.
Nearly 80% of the surveyed companies felt that the current scenario in the Indian market is a temporary phenomenon and expect that the all-India cement consumption to grow between 9% and 10% over the next two years. Some 10% of the respondents even believe that the growth will be more than 10%. This clearly brings out the optimism on the demand growth, it said.
On the back of strong 9%+ consumption growth (domestic and export demand), the total cement demand is expected to cross 200 million tonne by FY 2010 and 220 million tonne by FY 2011. As against the projected addition of 120 million tonne over the next three years, the actual addition is expected to be around 95 million tonne during this period due to delays in acquiring limestone mines, land for cement plants coupled with a sharp delay in equipment supply, which will keep the consumption growth at 9%+ level, it said.
However, the report says that there has been no consensus among the surveyed companies as far as cement prices are concerned. Nearly 50% of the respondents said they cannot comment on cement prices over the next two years while the remaining of them said they expect the price to improve 5%-10%. However, the same set of respondents expect that the prices to stay flat or possibly moderate in fiscal 2010.