Swiss firm Holcim controlled cement makers ACC and Ambuja Cements believe margins will be under pressure as cement price may remain stable in the short-term owing to oversupply in market.
However, the margin pressure is not deterring the two from expanding capacity by 5 million tonnes per annum to 57 million tonnes per annum this year. The cement industry, as a whole, utilised 80% of the 260 million tonnes per annum capacity last year. While announcing its annual results last week, ACC had anticipated the pressure on selling price of cement would be maintained in the near-term. Ambuja Cements said that “In the short-term, margins may remain under pressure.”
The demand-supply imbalance is not an upstart phenomenon for India's cement industry as the trend is being witnessed since the past two years at least. As per a recent report prepared by rating agency Fitch, India's cement production capacity was 201.3 mtpa in FY08 vis-a-vis 167.7 million tonnes per annum demand. Capacity went up to 236.9 million tonnes per annum compared to total demand of 181 million tonnes per annum in FY09.
The agency further said that the demand-supply imbalance would reach to its highest level in FY13 to 125.8 million tonnes per annum with capacity going up to 392.8 million tonnes per annum.
Fitch had said that the continued overcapacity in cement sector would exert further pricing pressure on the commodity in 2011, leading to squeezed margin for the manufacturers.
No comments:
Post a Comment