The Indian cement industry is expecting a slowdown with the GDP growth rate on a slippery path yet over 70Mt of fresh capacities in the pipeline over the next two years.
The industry added capacity worth 30Mt in FY08 and is estimated to add 45Mt and 30Mt in FY09 and FY10 respectively. Top industry players have voiced concerns regarding production growth rates and slowing consumption.
“As substantial capacity is being build, there will be losses. The consumption growth will not be equally robust, resulting in prolonged pain for the industry,” said HM Bangur, president of Cement Manufacturers’ Association and managing director of Shree Cement.
The industry will have huge capacities by 2010 with the addition of 20Mt in the last six months and 70-80Mt in the pipeline, he added.
The cement demand has a 1.3x correlation with the GDP. The capacity utilisation is expected to come down by as much as 85 per cent in the current financial year from 95 per cent in the previous financial year due to capacity addition and expected slowdown in the construction and housing sectors. And in FY10, it is expected to slip below 80 per cent.
Kumar Mangalam Birla, chairman of the Aditya Birla group, recently said the cement production growth would be 6 per cent in FY09. This is an indication of consumption de-growth.