Indian cement producers feel their margins will remain under pressure for the next several quarters as excess capacity build up in the country is expected to keep prices from moving up. This is despite various infrastructure development projects which is keeping demand alive even as real estate development has witnessed a slowdown.
"Cement prices will decline by Rs 10 per 50 kg bag in a year. We already have a case of surplus capacity in the north and we expect to add more capacity in the coming quarters, which will worsen the situation," says Ambuja Cement (ACL) MD A L Kapur.
He said good times were now history for cement makers, as demand had weakened and supply had increased significantly, especially in North India. In the June quarter, ACL reduced cement prices by Rs 3-5 per bag in Gujarat, while prices remained unchanged in other markets at a time when input costs have shot up. Only in some parts of Maharashtra, ACL increased prices by Rs 2-3.
Not many cement makers want to bet on how prices would move in the future. But most agree with Mr Kapur’s contention that cement makers’ margins will remain under pressure in the near future. "The bullishness surrounding the cement sector has ended due to overcapacity. We may not be able to pass on the increase in input cost to consumers," says Shree Cement managing director HM Bangur.