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Quake may not give major boost to cement demand

Our Bureau

KOCHI, Feb. 21

CONTRARY to the general perception, the Gujarat earthquake is not expected to boost demand for cement significantly.

As against an installed capacity of 113 million tonnes, the additional demand for cement due to the earthquake is expected to be just 2 million tonnes, the Cement Manufacturers Association of India has said.

In 1999-2000, the demand for cement despite a 15-per cent growth, was only 93 million tonnes, Mr T.M.M. Nambiar, President of the Cement Manufacturers Association of India and Managing Director of ACC, said at a press conference here. According to recent estimates, during 2000-01, cement demand is expected to grow by only 3 per cent.

The cement industry had been reeling under excessive supplies and uneconomic realisation for the last four years, the association said.

As a consequence, investment had considerably slowed down and there had hardly been any addition to capacity in the industry. This was a ominous signal, considering the requirement of cement for massive infrastructure development and ever-increasing hous ing requirements, the association warned.

Compared to the price of other construction materials, cement prices had hardly increased over the past five years, the association said.

Cement prices were driven by demand-supply equation, cost of production, capital-related costs, brand value, grade of cement, distance from source of supply, seasonality and fair return on investment.

While cement prices kept low, the return on investment was the major casualty, the association said. Considering the steep escalation in input costs, cement was still under-priced as the bottomline of several cement companies revealed. There were over 20 cement companies in the red and over ten companies had been referred to the Board for Industrial and Financial Reconstruction, the association said.

Cement, it said, was a capital-intensive industry with a total investment of Rs 30,000 crore, out of which almost Rs 15,000 crore was in the form of debt. The stagnation in prices on the one hand and steep hike in electricity charges, price of coal and f reight rates on the other had rocked the industry.

The association rued the plight of the industry and said that there were several multinational players with deep pockets and long staying power looking around for ailing cement units in the country.

To maintain the resilience of the sector, prices would have to be revised, it said.