Economy & Market
Cement firms face challenges
Industry observers feel that cement companies continue to face challenges owing to weak demand, rise in production costs and excess capacity.
Some analysts expect that the demand may pick up by the end of this month. However, they expect the pricing power of cement firms to decline marginally, with fresh capacities added in the last few months flowing into the market.
The industry plans to add new capacity of about 71 million tonne in the next two financial years. At present, it has an installed capacity of over 315 million tonne to cater to the demand of about 230 million tonne.
Further, with the government's plan to de-control diesel prices, cost of production may also increase. It will become difficult to pass on the cost to the consumer when demand is not keeping pace with production.
Imported coal prices declined 28 per cent to $86 a tonne in the September quarter. However, the benefit of lower coal prices was partially negated with a rupee depreciation of 21 per cent against the dollar.