Indian cement manufacturers face hard times

{reg} The Indian cement industry is set to experience hard times as excess capacity, low prices, and higher input costs are set to dampen the industry’s growth. The sector added 40 million metric tons of fresh capacity in 2009-10, a fifth of 2008-09 capacity with more plants set to come online later this year. Capacity utilization levels are expected to touch seven-year lows of 79 per cent in 2010-11.

Cement prices have fallen by 5 to 10 rupees per bag due to the overcapacity resulting in a glut in supply. Demand is slated to pick up by the end of the year and grow by ten percent annually though higher input and transport costs are expected to cut into manufacturer margins. With stiff competition among the players most companies have little pricing power.

To help solve this problem companies have embarked upon cost rationalization programs to help control costs. Some companies have also begin to undertake consolidation campaigns to integrate material suppliers to help reduce costs while at the same time increasing volumes. [/reg}