The Hindu Business Line : Cement consumption bounces back in February

Chennai, March 19 The growth in cement consumption has bounced back in February after the monsoon lull. This would see demand exceeding supply in the coming months and buoyant prices, say manufacturers.

During the first six to eight months of 2008-09 the supply is bound to be tight with no new additions in capacity expected. From September 2008 onwards some growth in production capacity would happen and the last quarter would see sufficient new capacities in place to match the demand. As of now the installed capacity is estimated at 174 million tonnes a year with capacity utilisation in excess of 100 per cent. As of February, the installed capacity was about 14.55 million tonnes a month compared to 13.79 million tonnes in the previous year.

Cement consumption grew over 10 per cent in the South in February compared to the same month in the previous year. Tamil Nadu showed the highest growth in consumption in the region at about 14 per cent with Andhra Pradesh and Karnataka around 12 per cent. Kerala, where the growth was around 4 per cent, showed an increase of 6.5 per cent.

Manufacturers describe the demand in March as ‘bullish’ with cement availability scarce. No new capacities are expected in the next two quarters and prices are bound to be buoyant — price increases of about Rs 2-3 a bag are happening with prices ranging around Rs 250-255 in the South, they say.

New capacity

The second half of 2008-09 would see over 10-12 million tonnes of new capacity coming in stages in Tamil Nadu and Andhra Pradesh. But with the growth in consumption expected to sustain at around 10 per cent the addition would be absorbed. Most of this capacity would be in place only in the last quarter when supply would start meeting demand and prices are expected to stabilise, manufacturers say.

Region-wise, the growth in consumption during the year has been around 10 per cent over the previous year in the North and South, 15 per cent in the West, 5 per cent in the Centre and 2 per cent in the East. These contribute to a 9 per cent growth across the country.

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