Sucheta Dalal :A cement glut may flood the market
Sucheta Dalal

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A cement glut may flood the market  

April 2, 2010

Over the past few months, the cement industry has been enjoying an upward momentum in cement prices due to the peak demand period. However, an analysis of the monthly dispatches and the new capacities commissioned paint a gloomy picture for the months to come.

According to Cement Manufacturers’ Association data, total installed cement capacity in India was around 219.17 million tonnes (MT) as on 31 March 2009. During FY2010, around 35MT of new cement capacity has been added. Thus, total commissioned cement capacity has gone up to around 254.17MT.

Total cement dispatches for January 2010 stood at around 18.15MT. Given that dispatches in January 2010 were one of the highest-ever recorded monthly figures, yearly dispatches can be calculated at a projected figure of 217. 89MT.

Thus, comparing a total commissioned capacity of around 254.17MT with a yearly dispatch of around 217.89MT, an annual over-capacity of around 36.27MT is expected in the demand-supply situation.

However, 36.27MT could be the least possible annual over-capacity figure, as January 2010 has been taken as the base. Again, recently-added capacities are likely to run on full steam in the months to come. In addition, analysts expect cement demand to decline in the future.

The onset of the monsoon season from June is likely to slow down construction activities, resulting in lower cement demand, much lower than the figures for January 2010. In addition, demand created due to construction activities for the New Delhi Commonwealth Games will start petering out by July 2010. This will impact the northern region in particular, pointed out an analyst.

Among the companies that have commissioned new cement capacities over the past one year are Madras Cements, Chettinad Cements, Grasim Industries, Jaypee Cement, UltraTech Cement, Dalmia Cement, India Cements, JK Lakshmi Cements, and Kesoram Industries. — Amritha Pillay

-- Sucheta Dalal