From what research houses and their analysts have been saying lately, the situation isn’t as bad as is being made out, because India could very well remain a cement-deficit nation up until June 2009.
That’s the message Deutsche Bank gets following a meeting with select cement players and distributors.
In a report, the bank said the supply problem may aggravate in the medium-term as existing capacities find it difficult to maintain utilisation levels.
On fresh capacity addition, it said about 60-62Mt would come up between January 2007 and December 2009.
Of this, incremental output would be only 4-5Mt in 2007, 8-10Mt 2008 and about 20-25Mt in 2009.
So, unless cement demand growth falls to less than 6-7% - a very unlikely scenario considering the infrastructure growth imperatives - India should remain in cement deficit till June 2009, says the report.
Demand for cement is expected to grow at 10-12% annually (or about 16 to 18Mta), which, if holds true, should ensure that the pricing environment too remains healthy.
Also, there is a section of analysts that believe that new capacity addition could be slower than anticipated, due to constraints with respect to supply of cement manufacturing equipment.
In another note post a meeting with India Cements, domestic brokerage SSKI said the company management expects supply to lag demand at least till March 2009 driven by delay in new supplies by 6-12 months (due to delay in equipment supply & regulatory approval) and limited blending potential (due to limited availability of fly-ash for new capacities).
Additionally and on the positive side, the current industry growth is not a fair reflection of actual cement demand, as there is unmet demand due to supply constraints, SSKI said.
