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Cement manufacturers are pinning hope on the infrastructure boom as well as the 2019 general elections to boost demand.
According to M Ravinder Reddy, Director (Marketing), Bharathi Cement, the demand has already started picking up in the last six months, after remaining more or less flat the last two-threeyears. As 2018 is the year before elections, he said, government spending on infra projects would be higher.
Surplus capacity
Last year, cement demand, pan-India, was 300 million tonnes against the installed capacity of 500 million tonnes.
The South has a capacity of 175 million tonnes against a demand of 70-75 million tonnes. A chunk of the capacity comes from plants in Andhra Pradesh, Karnataka and Telangana due to the availability of limestone, he said in an interaction with BusinessLine .
Reddy, who was in Kochi to launch a new product Bharathi Ultrafast, said the industry is looking at double-digit growth this year, especially with infra projects like national highway development hitting the fast track, and irrigation projects in Andhra Pradesh gathering pace after the bifurcation.
The excess supply, according to him, had impacted the companies’ pricing power and pressure is mounting to improve margins.
EBITDA of manufacturing companies earlier was in the range of ₹1,000-1,200 a tonne, and had come down to ₹500-700.
Raw material cost
Asked how companies are managing the increase in the cost of raw materials such as petcoke and diesel, Reddy said: “We have a thermal plant and a Waste Heat Recovery System (WHRS) that helped improve power generation by 7-8 MW.”
As power and fuel are the major inputs, the company is exploring alternative fuels such as municipal waste. A pilot project had helped meet 10-12 per cent of the requirement.”
On expansion plans, Reddy said the company will try to grow in the eastern region initially by setting up a one million tonne capacity plant in Vizag.
Bharathi has a production capacity of 7.75 million tonnes and a market share of 4 per cent in the South. With 25 players, the total size of the southern market is 70-72 million tonnes and is valued at ₹49,000 crore.
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