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Cement prices up and rising
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‘Prices may exceed Rs.300 per bag and still the availability will continue to be a question mark’
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Concrete finding: The demand–supply gap for cement will continue for the next 10 years to come, going by the country’s huge infrastructure needs.
After a very good rainy season, the construction activity is expected to start in next two weeks throughout the country. India had a very good monsoon this year benefiting a good crop and is helpful to the construction industry in the coming summer. Festival mood is over and the labour force is returning back to work. In north due to heavy fog the construction activities may get delayed up to January 2008.
In Andhra Pradesh, cement consumptions have started picking up well in this week itself.
The State has witnessed increased cement consumption during this strong monsoon period also.
The August to October 2007 sales has seen 20 per cent increase in consumption at 43.50 lakh tonnes against August to October 2006 period consumption of 35.75 lakh tons. So far, the country’s cement consumptions for the year 2007-08 have recorded around 11 per cent increase during the first half year 2007-08.
Investments
It must be noted that these consumptions are achieved despite Reserve Bank of India (RBI) restrictions on real estate sector, increased interest rates on home loans and the lower than expected investments in Infrastructure sector. Now that the inflation pressures are easing and the elections approaching, the governments have to start completing the ongoing projects on fast track. On the other side FDI is pouring into the country.
The Prime Minister has confirmed the investment need of Rs. 20,00,000 crores on infrastructure sector in the next 5 years.
The recent decision by the Government of India to increase the investment limit from Rs.100 crore to Rs.1,000 crore for the Infrastructure projects for taking clearance from PIB (Public Investment Board) and RBI’s nod to divert US $ 5 Billion per year for the Infrastructure sector from the Forex reserves will boost the construction activities in the country from 2008.
The State Government plans to complete the irrigation projects and housing schemes during 2008 in view of upcoming elections. The SEZs, industries, Malls, Multiplexes, Gated communities and Commercial space are coming up through out the State.
The much talked about capacity additions during the year 2007 have not taken shape thus leaving the demand – supply gap wide open.
All the new projects are delayed for various reasons. Consumptions are bound to go up by 12.50 per cent to 15 per cent in the coming years. Good crops are also likely to add to a strong rural demand for cement.
High demand
I foresee the demand–supply gap to continue for the next 10 years to come, going by the country’s huge infrastructure needs.
Prices shall keep going up and up. China is targeting to reach the production level 1,250 Million tons by 2012 and we are talking of doubling our present capacity of 165 Million tons by 2011.
The much awaited cement imports from Pakistan are not making any impact so far and may not give relief.
So Indian cement prices will go past Rs.300 per bag and still the availability will continue to be a question mark. It is good for the Infrastructure players to have a tie-up for the cement supply.
Otherwise these important infra projects may get delayed and will there by impact our GDP growth.
RAMESH CHANDRO
Managing Director
Ckoramaandel Cements Ltd.
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