Cement prices seen up 10% in 6 months, India

Domestic cement prices are expected to rise by over 10 per cent in the next six months, while the upward trend will last for another three years due to the buoyancy in local demand and rising exports.

Another factor which will prop up prices is the negligible capacity addition in the local cement industry in the recent past.

The current average domestic price of cement is around Rs 160 per 50 kg bag which is expected to go up to Rs180 in the next six months. With the increasing international demand, cement exports are expected to grow by over 50 per cent.

"After the 9/11 attack, most of the big investors in the Gulf countries, who used to pump in money in real estate and stock markets in the US and Europe, have started withdrawing their investments from those countries and become active in the infrastructure projects in the Gulf region. This has caused major rise in cement demand in the region," said Hemant Pandey, senior vice-president, Sanghi Industries Ltd (SIL).

"SIL has the world’s largest cement plant with an installed capacity of 4Mt. The company has stopped taking exports orders till 2006 because of optimum capacity utilisation at its plant. The company plans to double its capacity to over 8Mt by investing over Rs 700 crore to meet the increasing exports demand," said Pandey. Reconstruction activities in Iraq is another reason for the spurt in international cement demand. With India’s close proximity to the Gulf region, most of the cement demand from that region is met through exports from India. India accounts for over 40 per cent of the cement exports to the Gulf countries.

Major infrastructure development work in India taken up by the private and public sector has caused buoyancy in local demand also. According to an industry expert, the installed capacity of the cement industry (large plants) has shown a marginal rise at 147.68Mt as on April 30, 2004.compared with 146.38Mt on March 31, 2003.

The capacity utilisation in India is estimated at around 80 per cent. Over 117Mt of cement was produced during the financial yea