The widening demand-supply gap is likely to result in a 4.5-5% increase in cement prices in North India this year, HDFC Securities has said in a report. The report titled ’Regional Cement Play focus North India’, has evaluated the market conditions prevailing in the cement sector taking into account the demand-supply situation. As per the report, while growth in the construction and infrastructural activities in the country has ushered in a fresh wave of consolidation in the industry, the development is unlikely to create cartelisation of operations as the cement demand-supply mismatch is likely to widen this year. As against a demand-supply deficit 0.05 million tonne of cement during 2004-05, this year the deficit is likely to increase further to 0.49 million tonne resulting in cement prices going up between 4.5-5% in North India, the report has said.
Compared to last year, this year’s price projections are lower as the cement capacity utilisation has also touched an all time high level of 96.6% in North India (production-26.7 mt, capacity 27.65 mt). Last year, cement prices in the region on an average grew by 6.5%. The price increase is despite all major cement companies, including Birla Corp, Jaiprakash Associates, JK Corp, Mangalam Cement and Shree Cement industry looking at capacity additions resulting in North Indian cement capacity increasing to 29.65 million tonne this year and to 31.65 million tonne during next fiscal. At the national level, the report has said cement demand would grow at a CAGR of 6.6% over the fiscal 2005-07 as against 3.6% and 6.2% rise in cement capacities and production, respectively, resulting in increased capacity utilisation along with a better pricing scenario. The report has projected that demand-supply deficit in all regions of country, except central and south regions, to go further resulting in higher cement prices.