ACC may shut more plants if demand fails to pick up

ACC, the country’s largest cement maker that had temporarily idled a plant in Himachal Pradesh this month, said it has kept all options open on similar shutdowns at its other locations in case there is no satisfactory demand for its products. The company, with a capacity to make 23 million tonnes of cement annually, has 15 plants across the country.

On December 16, ACC shut its 2.4-million tonne Gagal-II plant in Himachal Pradesh for a fortnight due to inventory pile-up at the unit. Last month, the company had laid off 25 per cent of employees at its wholly-owned subsidiary ACC Concrete.

Sumit Banerjee, managing director, ACC, told Business Standard, “The decision to shut our Himachal unit was the right one. If required, we will take such decision in our other plants also in the future if the demand is not satisfactory and our stocks pile up.”

Banerjee added: “What we decided on December 16, is in the best interest of our company. When you have lesser demand in the market and have high level of stocks, especially when the product is a perishable one, it makes sense to try and cut production so that we do not end up losing money and value of products.”

ACC, promoted by Swiss cement major Holcim, has plants in eleven states, including Rajasthan, Himachal Pradesh, Madhya Pradesh, Tamil Nadu, Karnataka and Orissa.

When asked which other regions like the northern part could meet similar shutdowns, Banerjee said, “One cannot say, as it depends on the level of inventory and how the market shapes up in the next quarter which is very crucial period for cement consumption in the country. We have to see how the recent incentives from the government for infrastructure and real estate turn out in the market.”

The company has one more unit in Himachal Pradesh — at Gagal-I with a capacity of 2 million tonnes per annum. The company’s units in the state serve Haryana and Punjab’s cement demand.

J Dattagupta, chief commercial officer, ACC, pointed out two “problematic factors” in the region. “One is the subsidised cement import from Pakistan, which is taking care of 45,000 tonnes of demand every month and in turn creating demand depression.

Else, the demand growth, probably would have been 4-5 per cent and the condition would not have necessitated the shut down,” he said. Cement consumption in the North during April-October grew by just 1 per cent against over 10 per cent during the same period last year. “Second is the very high transportation costs in Himachal which is far higher than anywhere in the country. As a result we are not that competitive as we cannot take our output to far off places,” added Dattagupta.

ACC is planning to take its overall capacity to 30.4 million tonnes by the end of 2010.