Cement prices may go up as domestic supply trails demand significantly and new capacities face delays. With capacity utilisation at 97%, no significant imports likely in the near term and the export market turning attractive, manufacturers and analysts feel supply will not be able to keep pace with domestic demand this year.

“The demand for cement may remain ahead of supply through the year if the present rate of economic growth continues,” India Cement MD N Srinivasan said.

Rupesh Sankhe, a cement analyst with ICICI Direct said: “With new infrastructure projects coming up and increased construction activity, demand would remain robust at around 10% and that would reflect in prices, which may move up in the near term,” he said.

According to the Cement Manufacturers’ Association, production rose 7% during April-July 2007, while domestic consumption rose 9% during April-June 2007, compared to the corresponding period last fiscal. This was largely due to the 40% decline in cement export during the period.

“Attractive domestic prices, rupee appreciation and manufacturers’ bid to retain their share in the domestic market, where demand is galloping, led to decline in exports,” said a senior executive of a company, which exports cement to West Asia. But the situation is likely to change.

“Exports may pick up again since overseas prices are becoming attractive,’’ he added.

Better logistics post-monsoon could be another positive factor prompting exports. This means there could be less cement available for domestic consumption. India exported 10 million tonnes cement last year.

With existing capacity utilisation at 97%, any significant increase in production can be possible only if new capacity is added. The current capacity stands at 172 million tonnes per annum.

Cement companies have added 5 million tonnes since the beginning of the year and plan to add 12.5 million tonnes this year. Analysts and even some manufacturers believe it may not be possible.

“Equipment supply constraints, manpower crunch and environment clearance delays are obstructing expansion of capacities,” said a cement manufacturer engaged in capacity expansion.

The government’s efforts to encourage imports has not borne fruit. The first batch of cement from Pakistan may start arriving only next month. Three Pakistani manufacturers are likely to get Bureau of Indian Standards (BIS) certification by the month-end, which will make them eligible to export the commodity to India.

“Imports from Pakistan may not impact the domestic market significantly in the near term. Pakistan has a surplus capacity of 5 million tonnes, but non-availability of BIS certification and logistics problems may not let much of Pakistani cement enter India,” Mr Sankhe said.