Cement firms in north India may meet ACC fate

ACC Ltd. | Cement & Construction Materials | Construction & Infrastructure | BSE: 500410 | NSE: ACC

19 Dec 2008 Evaluate

With domestic cement major ACC succumbing to the economic slowdown and shutting down its 2.4-million-tonne clinker unit in Himachal Pradesh, other cement makers in the North may not remain insulated for long. The possibility of either similar shutdowns or substantial cuts in capacity utilisation in the region is imminent as the overall consumption growth there is only 1 per cent, according to the latest statistics from the Cement Manufacturers’ Association (CMA).

Out of the six states in the northern region, Uttarakhand, Himachal Pradesh and Punjab have shown negative growth rate in consumption to as high as 14 per cent. However, Rajasthan and Haryana witnessed a poor consumption growth rate of 5 per cent and 4 per cent, respectively against the industry’s average growth of 7 per cent.

Grasim Industries, part of the domestic cement giant Aditya Birla group, is adding around 8-9 million tonnes of new capacity in the region and Shree has already added 3 million tonnes. Jaypee, Binani, Ambuja, JK Lakshmi and JK Cement are the other dominant cement manufacturers in the North. Cement players specifically in the North are being forced to shut units due to imported cement from Pakistan. Fresh capacity is also another factor.

The industry’s capacity utilisation has dropped to 85 per cent in April-November period of FY09 against 93 per cent in the year-ago period. There is a possibility that companies will reduce the number of working days from six to seven days to four days a week. They would prefer to avoid inventory pile-up. The 206.46-million-tonne domestic cement industry has added over 8 million tonnes of fresh capacity so far in the current financial year. It has plans to take its capacity to 230 million tonnes by the end of the current financial year.

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