Cement demand to grow by 7% in 2018, excess capacity a concern
New Delhi: Cement demand in India is expected to grow by 7 per cent this year but intense competition and "not enough" consumption will lead to excess capacity, cement maker ACC said in its annual report.
The demand will grow in 2018, helped by the Centre's push on big infrastructure projects and continued focus on rural development and affordable housing schemes.
"Consequently, the demand for cement in 2018 is expected to increase from 6 per cent to 7 per cent," ACC said in its annual report for 2017. The cement industry had a growth of 6 per cent in 2017 as against 5.1 per cent in the previous year, it added.
Around 66 per cent of its demand came from the housing sector, followed by infra with 18 per cent and 16 per cent by commercial sectors.
The total installed capacity of the cement industry in India is around 465 million tonnes (MT), ACC said.
However, the industry is battling with under-utilisation of the installed capacity as it is currently producing 305 MT for both domestic demand and export requirement.
"Cement industry is grappling with sub-optimal effective capacity utilisation of 70 per cent, with capacity overhang of more than 100 MT," said ACC.
While cement plants in northern, central and eastern regions of the country produced at levels above 85 to 90 per cent of capacity, excess capacity in the southern region has inhibited the industry's average capacity utilisation.
"Intense competition and not enough demand pull, will continue to lead to excess capacity in 2018," ACC Cement said adding "this situation is expected to correct itself in 2019 with the increased outlays on housing, infrastructure development and agri-sector initiatives."
While, over five-fold increase in Pradhan Mantri Awas Yojana - Urban to Rs 31,500 crore, is expected to revive urban housing demand, while generating a 30 per cent share of the overall demand for cement, it added.
"Infrastructure development outlay for highways, roads and railways has increased by 11 per cent and 22 per cent respectively. This will boost demand for cement from the infrastructure sector, which is estimated to account for 20 per cent of cement demand," ACC said.
It also added that a social welfare surcharge of 10 per cent, will replace the existing 3 per cent education cess on customs duty, which will marginally inflate the cost of imported inputs such as petcoke and non-coking coal products.