The Hindu Business Line : Cement plants unable to meet demand despite operating to full capacity

Chennai, July 15 Most cement plants across the country are operating at close to or a little more than full capacity and yet they are not able to meet the demand in the market.

In normal times, most manufacturers would have gone in for maintenance shutdown of the plants either just before the onset of the southwest monsoon or after the rains have started. They would build up stocks to meet the demand after the monsoon. But that is not possible this year because of the heavy demand, say manufacturers.

Retail surveys done by manufacturers show that there is not a bag of cement available with stockists in most of the major markets in the country. This is why prices have been going up week after week, the manufacturers say. In some markets, they add, the price quoted by a retailer in the afternoon is not the same that he had quoted earlier in the day.

The manufacturers also say that they are flooded with requests from some large builders or persons of influence for at least a wagonload of cement bags to be despatched immediately for their requirement. State Governments are also urging them to first cater to their markets before moving cement out to the neighbouring markets.

According to the manufacturers, prices will continue to be high mainly because of the huge and growing gap between demand and supply. Despatches are higher in the first three months of this year over the same period last year (see table). Data available shows that all the major manufacturers have operated their plants at between 92 per cent and 130 per cent capacity in April and May 2007.

This, say the manufacturers, shows that the cement companies are doing their best to meet demand and there is no question of slowing down production to artificially push up prices.

Capacity addition

Those in the industry say that capacity addition is also going to be a problem and only about 5-8 million tonnes of fresh capacity will come into production this year, against more than 10 million tonnes that was anticipated. The problem in adding capacity is because of delays in machinery supply, according to the manufacturers. And, even this additional capacity will do little to meet demand, which is growing at a healthy clip.

They also say that efforts to import cement — the Tamil Nadu Government has said it will look at cement imports while the Andhra Pradesh Chief Minister has asked the Centre to directly import cement to curb prices — will not result in any significant quantity of cement coming into the market mainly because cement is just not available at the prices that are being talked about.

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