India’s top cement maker Associated Cement Companies Ltd expects volume growth in the year to March 2005 to top an industry average of eight per cent, a senior official said on Wednesday. Ashok Jain, executive director of ACC, told Reuters in an interview that strong appetite from the construction, industrial and infrastructure sectors would continue to drive demand in India, the world’s biggest cement consumer after China.
"The good monsoon of last year will result in a better growth rate this year," Jain said. "And if we have a normal monsoon, we should return to a normal growth rate of close to eight per cent for the industry this year. We will be in line or a bit better." Industry volumes grew by 5.5 per cent in the year ended March while India’s economy - Asia’s third biggest - is expected to have expanded by more than eight per cent in the same period.
ACC plans to spend 2.86 billion rupees this year on plant modernisation, in an effort to increase annual capacity by 0.7Mt to 18.3Mt. Jain said house-building remains the biggest demand driver, accounting for 60-70 percent of India’s cement consumption. "I believe the momentum will be maintained," he added. The government’s continued thrust on infrastructure, particularly roads, would also increase demand. "The next big thing will be the development of sea (ports) and airports," Jain said, adding that a further boost would come when the government decides to link all of India’s rivers.
India’s cement industry has been suffering a supply glut, but Jain said signs from the regions indicated the gap between demand and supply would be bridged over the next one to two years. "The supply-demand balance is more or less matched in north India, and nearly there in central India," Jain said, adding that the gap was largest in western and southern India.
The current operational capacity in India is about 138Mt of cement, while consumption is expected to rise to about 126Mt by the end of the year. But with 54 companies all competing for the same business, fierce price-cutting has led to depressed prices in the sector. "With every passing year, the pricing situation will get better till again we see big additions of capacities," Jain said. Prices had improved in the past quarter, which is always the best period for demand growth, though Jain expected further volatility in areas where the supply-demand imbalance remained.