The Indian cement industry is expected to find further appreciation of its current margins in the coming days due to the deepening of the imminent supply-demand gap on account of infrastructure and housing thrust in the Union Budget.
Though the demand for cement is expected to grow by an average 10-12 per cent a year, the industry until now has been maintaining stoic silence over any expansion plans in the state and outside. In Andhra Pradesh, which is one of the leading cement producers in the country, the cement industry expects a double impact starting from October 2005 when the construction work of several irrigation projects undertaken by the state government is expected to begin.
"The efforts to optimise the existing production capacities of the Indian cement industry to utilise the demand situation will only have marginal results as the production of portland pozzalina cement (PPC), which is a blend of regular clinker and fly ash, has already gone up to a maximum in the face of acute fly ash scarcity," S R B Ramesh Chandra, president of All India Mini Cement Manufacturers Association, and managing director of Coromandel Cements Limited, observed. With the production capacity in terms of clinker remaining constant, the fly ash content in PPC cement adds to the volumes as it constitutes 25 per cent of the end product. According to Ramesh Chandra, the proportion of PPC in total cement production has jumped to at least 55 per cent this year as compared to 44 per cent during 2003-04.
Cement prices have already been witnessing upward revision in several places like Delhi, Chennai, Mumbai and Andhra Pradesh mainly due to its surplus status. The state produces 22Mt of cement out of which the local consumption accounts for just 11-12Mt. For the past few months the price of the cement bag in the state is ruling between Rs120 and Rs137 as compared to Rs165 in Delhi which rose from Rs125 per bag in October 2004.
According to the industry projections, local consumption is expected to grow to over 14Mt in Andhra Pradesh in the year 2005-06 and the exports from Andhra are also expected to grow up to 2.5-3Mt from the existing 1.5Mt during the current year. This, combined with the growing demand across the country, is likely to affect the prices in Andhra Pradesh too in the coming days. When it comes to growing exports, the cement manufacturers are apprehensive of some restrictions by the Centre to contain supply demand gap in the days to come.