Problem of Plenty | Outlook Business
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Graphically Speaking

Problem of Plenty
For the first time in 15 years, cement production is set to witness a decline

The cement industry is shaking off its demonetisation blues which saw records being broken — albeit, on the down side. Production volume in FY17 is likely to see a year-on-year decline for the first time in 15 years as demonetisation has hit demand. In fact, volume in January fell 13% YoY, a first such decline since January 2001. Demand in FY17, too, has been the weakest in 10 years. However, average prices have increased by 5% owing to supply moderation and pricing discipline. The cement industry, which currently has a operating capacity of 420 tonne, is expected to add an additional 50 MTPA over FY16-18 at a CAGR of 6%, compared with a CAGR of 4.9% in FY13-16 (additional 40 MTPA). The country’s eastern region will continue to lead supply growth and is likely to add 17 MTPA through FY16-18, followed by north (14 MTPA). In FY17, already over 7 MTPA capacity has been added in the east by three cement companies, and 3 MTPA in the north by just one company, JK Lakshmi Cement. Not surprisingly, the CAGR capacity addition in the eastern (10%) and northern regions (7%) is expected to outpace cement demand in these regions.

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