Cement Demand Growth to Outpace Supply Growth – India Ratings

indiaratingsBy Accommodation Times News Services

Ind-Ra-Mumbai-22 January 2015: India Ratings & Research (Ind-Ra) has revised its cement sector outlook for FY16 to stable, from stable to negative a year ago, on expectations that demand growth (6.5% to 8%) would outpace supply additions (6.7%) in FY16. Cement capacity utilisation which was around 71% in FY14 is likely to improve to 73% to 75% in FY16, as was last seen in FY11.

The southern region of India, with a significant oversupply, is likely to maintain a supply discipline during FY14-FY16 with a capacity addition of just 7mtpa over this period (5% of its FYE14 installed capacity). This shall improve cement capacity utilisation in this region to 61%-63% in FY16 from 56% in FY14.

The central regions of the country, will likely add 5mtpa during FY14-FY16 (11% of its FYE14 installed capacity), and consequently improve capacity utilisation to around 85% from the current level of 81%. Similarly, the capacity utilisation in regions of northern India, is likely to increase to 80%-81% in FY16 from 78% in FY14 as the region adds 13mtpa (16% of its FYE14 installed capacity).

Ind-Ra expects capacity utilisation of cement companies to improve across all regions barring eastern India. The companies in the east are adding around 17mtpa (31% of its existing installed capacity) during FY14-FY16, and thus supply growth in this region will likely outpace demand growth and thus reduce capacity utilisation in the region to around 70%-71% from 75% in FY14.  The companies in the western region are adding 10mtpa (18% of the existing capacity) during FY14-FY16, and thus, the capacity utilisation in this region is expected to remain stable at the current level of 73%.

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