Cement sector under pressure

The targets set by the working group on cement industry seem too be unachievable. According to the Five-Year Plan for 2012-17, industry will have a capacity of close to 470 million tonne per annum (mtpa) by 2017. India, with an overall capacity of 360 mtpa, is the world's second largest cement manufacturer, with China coming second. The target requires an addition of ten per cent per year from here. Based on current demand indications, cement companies do not foresee any significant improvement in the cement market in the near term. A decline in profitability and net sales has been affecting the sector from the last 12 quarters. One-fourth of the overall capacities is sitting unutilised as the demand has dipped drastically.

The sector witnessed expansions doubling the capacity from 180 mtpa to current levels in a short span of five years (2007-12), the fastest in sector's history. The expansions, however, were not matched by the actual consumption on ground. "When those targets were made, people had not anticipated the current slowdown," says Chouksey. The country's current cement consumption stands around 260 million tonne. Expansion from here on will be a challenge and will happen at a rather slow pace. Regulatory process too will slow down the growth. It takes at least five years for land acquisition and then two more years to erect the plant, in all, seven years for an efficient player compared with 3 years earlier.