Excess capacity and slow growth in demand have dimmed the prospects of a second increase in cement prices in December, thus proving the forecast of Merrill Lynch wrong. The firm had forecast an increase of Rs 7 per bag by December 12, followed by another increase 10 days later.
Analysts say owing to the 20 per cent overcapacity existing in the industry, a price increase would not be feasible. A 7.4 per cent year-on-year growth in November shipments at 8.27 million tonne, as against 1.4 per cent in November 2000, reflected these capacity hikes, they added.
The aggregate capacity of large cement plants rose to 129.43 million tonne this year. Production during April-November was 66.10 million tonne against of 66.03 million tonne shipments, officials in the Cement Manufacturers Association said.
Last year, during the same period, cement companies sold 62.39 million tonne against a capacity of 115.6 million and production of 62.55 million.
Prices of the commodity in the domestic market usually rise during December because of a general increase in construction activities after the end of the festive season. Prices in the western region, which accounts for the biggest market, have risen by a modest Rs 4 to Rs 158 per 50 kg bag in the past two weeks.
