Cement prices up on high demand

Cement prices up on high demand
Published: 24 April 2006

Increased cement demand and no major capacity addition from large Indian players will keep cement prices on firm ground for most of ’06 and ’07. The tight demand-supply situation seen at present is expected to last for two years. Since about 10-14Mt of additional capacity is expected to be added, while incremental demand is expected in the range of 28Mt.

Scope for sweating existing assets is limited as capacity utilisation is high already. While the total installed capacity is 160Mt, demand is expected to grow at eight per cent levels.

Seeking to capitalise on this short window of opportunity, cement companies, who have reached optimal utilisation, are resorting to more blending of cement, a practice of adding materials like fly ash/slag to cement without affecting its properties in any way. The blending ratio has increased in the past few years to levels of 1:3. Gujarat Ambuja for instance is today running at near 100 per cent levels, and plans to increase its blending ratio, which is in the range of 1:15-1:18. Higher blending improves efficiency and thereby profits of companies.

At the all-India level, production of pozzolona portland cement (PPC) variety of cement production is more than the ordinary portland cement (OPC) variety, showing that more blending is taking place.

As per CMA numbers, 51 per cent of cement production constituted PPC, while OPC was 40 per cent. What is noticeable is that the central and northern region players are producing more of PPC than OPC. PPC was 76 per cent and 63 per cent of overall production for Central and Northern regions respectively. In the northern regions, the level of capacity utilization is very high.