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East may face an oversupply of cement, say analysts

The pace at which cement capacity is coming up in the East has convinced analysts that the region may face an over supply — a situation that the southern states have been grappling with in the last few years

About 8.6 million tonnes (MT) of new capacity estimated to be added in the next two fiscal years would take the total capacity in the eastern region to 66.9 MT.

During the same period, other regions would add around 3­7 MT. Expectations that per capita consumption in the East ­ 90 kg against the national average of 200 kg — would rise from its current levels drove companies to put up new production lines.

Companies like Shree Cement, Emami, and JK Lakshmi Projects are betting on higher demand from new housing projects and infrastructure ventures like East Freight Corridor. Chances are that in order to gain marketshare, these companies would push up volumes and keep prices low. This could force existing manufacturers in the East to cut down capacity utilisation.

Analysts estimate that capacity utilisation in the East may dip to 68­69% in two fiscal years from 70%. In such a situation new entrants would be less impacted than existing producers. Companies with stronger presence in other regions would be better placed to counter a drop in capacity utilisation in the East.

Source: Economic Times