Cement prices, which rose sharply in 2006, is expected to start declining from the second-half of 2007, due to capacity-addition, according to credit rating agency Fitch.
‘‘Fitch expects prices to start softening from the second half of calendar year 2007, driven by capacity addition which are expected to go on stream during next fiscal year and 2008-09,’’ the agency said in a release.
Fitch estimates capacity expansion to be large during FY08 and FY09, with most of the burden on operating rates being felt in financial year 2008-09.
South India, with the maximum capacity addition planned, would bear the brunt on operating rates, it said. Fitch noted that cement price rose sharply in 2006, led by higher demand and to a certain extent by the push factor of the Supreme Court ruling on overloading leading to increase in freight rates.
On the costs, the agency said it would remain range bound, while crude high crude oil prices may have an impact on overall freight costs. ‘‘Overall margin pressure would exist on account of lower realisations and would be limited due to cost factors,’’ it said.
Fitch said the entry of Holcim, Lafarge, HiedelbergCement and Italcementi have accelerated the consolidation process, but it was far from complete and large proportion of the industry remains incomplete.