The capacity utilisation at cement manufacturing plants across the country declined in February due to tumbling sales in Southern region, trade sources said. Sales in South India declined primarily due to continuing political uncertainty in Andhra Pradesh. Several major infrastructure projects were held up due to Telangana issue, analysts said.
The capacity utilisation for February 2010 stood at 83%, down by 9%, against 92% recorded in the same period last year, said analysts Rupesh Sankhe and R Srinivasan of Mumbai-based broking firm Angel Securities in their latest report.
The decline was highest in Southern part of the country, which recorded utilisation of 69% in the second month of this year compared to 88% a year ago. However, the capacity utilisation in the central region surged to whopping 107% from 97%. According to sources at Cement Manufacturers Association (CMA), the Indian cement industry has an installed capacity of 240 million tonne, of which 219 million tonne has been estimated as effective capacity by the end of last fiscal year. Till December 2009, the cement plants across the country have added around 21 million tonne in capacity taking the total effective capacity to 240 million tonne.
Although Southern region performed below expectations, buoyant sales in central and western region have driven the Indian cement industry to post a 4.3% year-on-year growth in dispatches in February 2010. The cement dispatches registered growth of 13.9% and 8.5% in the central and western regions on the back of robust demand arising from the large-scale expenditure on the infrastructure and real estate projects. Further healthy demand came from the common wealth games related activities, Angel’s report said.
Southern region has recorded a 1% decline in dispatches during the period while dispatches in northern region increased by 4.26% and eastern region by 5%.
In fact, contrary to expectations of a substantial price fall due to significant capacity additions, the cement prices ruled high during February 2010 following strong demand and also due to constraints faced in transportation. The cement prices stood high by 6% in northern region.