Indian cement industry sending out mixed signals

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This week has seen the start of what is likely to become a string of positive financial results from the Indian cement industry. UltraTech Cement, Shree Cement and Hyderabad Industries have already seen massive improvements in their profits for the final quarter of 2011, up in one case by over 100% compared to 2010.

On the face of it such results do not chime with a recent report by Fitch Ratings, which predicts a 'negative outlook' for the Indian cement industry in 2012. Fitch's report says that based on expected growth of 2-5%, overcapacity and an increase in interest rates will prey on margins in 2012, making any mini-boom short-lived. The impressive profits may well evaporate come the end of March.

India's capacity utilisation rate dropped to just 65% in the last quarter of 2011. This is not a statistic indicative of a booming cement industry and, coupled to reports of increased profits from the sector, indicates that higher prices are being used to maintain margins.

With even more capacity being added every week and the prospect of increased input costs as the year develops, how long will this strategy work? Will the topic of cartelisation be raised again in India? The new head of the Cement Manufacturers' Association has a lot to consider as he takes up his role.

Elsewhere in this issue of Global Cement Weekly, we have the news that the German BDZ and VDZ are to fully merge, plant projects in Russia and Saudi Arabia and the latest on the developing situation in Kenya, where East Africa Portland Cement Company (EAPCC) is still in dispute with its workers. EAPCC and the government's expectation that work can resume on 26 January 2012 appears to be ill-founded considering continued resentment shown by the workforce.

URL: https://globalcement.com/news/item/732-indian-cement-industry-sending-out-mixed-signals

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