Cement demand in India may grow 10%

Country's cement demand may grow at a healthy rate of 10 per cent in 2012, but subdued capacity utilisation and costlier raw materials will keep prices under pressure, cement major ACC Ltd has said.

"The demand for cement is expected to grow at 10 per cent over 2011. A lower utilisation rate coupled with increase in cost of raw materials and increasing logistics costs are likely to keep overall prices under pressure in all regions," it said in its annual report.

The country's cement sector saw a demand growth of around six per cent in 2011 over 2010. ACC's slaes, however, grew by 11.5 per cent during the year at 23.73 million tonnes. Poor demand led to the industry's capacity utilisation falling

below 80 per cent in 2011.

India's total installed capacity of cement stood at 320 million tonnes per annum (mtpa) with the addition of 30 mtpa fresh capacity during 2011. Around 25 mtpa new capacity is set to be added in 2012.

"Pressure on costs will continue to mount mainly due to increases in the cost of domestic coal and owing to volatility in costs of imported coal," ACC said, adding that availability of fuel at reasonable rates was one of the main concerns of

the company as it uses large quantities of coal annually to meet its kiln and captive power generation requirements.

There was a steep hike in the price of coal in 2011 which adversely impacted the profitability of the country's cement makers.

"During the current year, coal prices are expected to further rise sharply. This, coupled with limited production of fuel in the country, is expected to result in higher input costs for a fuel intensive industry like cement," ACC said.

The cement major said as the the availability of linkage coal is gradually dwindling, it is trying to mitigate its fuel risk by increased usage of alternative fuels and optimisation of coal mix.

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