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.
Problem of plenty
For the first time in 15 years, cement production is set to witness a decline
To make this market exuberant enough for a bust will take considerably higher prices
Companies that maximise per share value, even if they don't grow will be great bets
Once we get over all this macho 'I can do everything on my own' nonsense, Life is much better
Engines of 'influence' work exactly the way power flows when you flip a switch
You want to see a business model that makes sense now; it is hard to change later on