Cement prices set for further gains

Cement prices set for further gains
Published: 17 August 2007

Indian cement prices may go up as domestic supply trails demand significantly and new capacities face delays. With capacity utilisation at 97%, no significant imports likely in the near term and the export market turning attractive, manufacturers and analysts feel supply will not be able to keep pace with domestic demand this year.


"The demand for cement may remain ahead of supply through the year if the present rate of economic growth continues," India Cement MD N Srinivasan said.


Rupesh Sankhe, a cement analyst with ICICI Direct said: "With new infrastructure projects coming up and increased construction activity, demand would remain robust at around 10% and that would reflect in prices, which may move up in the near term," he said.


According to the Cement Manufacturers’ Association, production rose 7% during April-July 2007, while domestic consumption rose 9% during April-June 2007, compared to the corresponding period last fiscal. This was largely due to the 40% decline in cement export during the period.


"Attractive domestic prices, rupee appreciation and manufacturers’ bid to retain their share in the domestic market, where demand is galloping, led to decline in exports," said a senior executive of a company, which exports cement to West Asia. But the situation is likely to change. "Exports may pick up again since overseas prices are becoming attractive,’’ he added.


With existing capacity utilisation at 97%, any significant increase in production can be possible only if new capacity is added. The current capacity stands at 172Mta.


Cement companies have added 5 million tonnes since the beginning of the year and plan to add 12.5 million tonnes this year. Analysts and even some manufacturers believe it may not be possible.