The Hindu Business Line : New capacities in South may dampen prices

Mumbai, March 19 Cement prices in the South may come under pressure with 12.3 million tonnes (mt) of additional capacity scheduled to go on stream by 2009-end.

Companies contributing to the increase in capacity are Dalmia Cement, India Cements, Madras Cements, UltraTech Cement and ACC. Small cement mills in Andhra Pradesh are also on course with their expansion programmes, which will further add to oversupply. Though new capacities are added, it takes at least 6-10 months for new plants to stabilise production.

Additional capacity

Dalmia Cement will commission its 2.5 mt greenfield plant at Ariyalur in Tamil Nadu by the end of the calendar year. It recently kicked off production of 2.50 mt from its greenfield project at Chinnakomerla, Andhra Pradesh. The company will also enhance capacity at Dalmiapuram near Tiruchi from 3.5 mt to 4 mt.

Madras Cements will shortly commission its two mt plant at Ariyalur . India Cements plans to increase capacity by 1.2 mt in Andhra Pradesh before 2009.

Ultratech Cement recently started clinker production from the expanded line at Andhra Pradesh Cement Works (APCW) and cement from the 1.3 mt grinding unit at Ginigera in Karnataka. It is also expanding cement capacity by 3.6 mt at APCW. Production at UltraTech will increase from 18.2 mt to 23.1 mt by the end of this fiscal.

At the national level, Holcim Group companies, ACC and Ambuja Cements, which account for a fifth of the total production of 207 mt, together plan to add 13 mt by 2010, while Grasim and UltraTech, part of the Aditya Birla Group, will add 14 mt.

Demand picks up

After a lull between October and December, demand picked up in last two months following various infrastructure projects announced by the Government.

On the back of supply constraints and demand from the government projects, prices in the South were up by Rs 5 (on a 50 kg retail bag) to Rs 270 while for bulk buyers it increased by Rs 3 to Rs 265 a bag in the last fortnight.

Though cement prices are on the rise, analysts expect them to drop by at least 10 per cent in 2009-10. Mr Vinod Juneja, Managing Director, Binani Cement, said, “Most wagons used for transporting cement have been diverted to foodgrain procurement which has caused disruptions in supply. Cement prices rose by Rs 5-10 a bag.”

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