Cement manufacturers foresee 2011 to be a challenging year as demand is expected to grow double-digit but it will still be insufficient to absorb the entire supply. Rising input prices and excess capacity will continue to depress margins for cement manufacturers. A higher growth in demand will follow good housing demand and the Government's thrust on infrastructure projects as the eleventh Five Year Plan comes to an end. With GDP growth estimates for 2011 coming at around 8.8 per cent, the cement industry can be expected to report a 10-11 per cent growth in consumption.

The incremental demand may not match the additional 25 million tonne capacity coming up next year. In 2010, the industry reported an average utilisation rate of around 70 per cent after adding a total of 30 million tonne capacity.

Southern region, saw a drop in demand and increase in supply due to flows from newly added capacities, will see more capacity additions in the coming year. Bharathi Cement and Madras Cements, are adding capacities during the year.

Prices realisation may improve marginally in central India where demand is matches supply, but South, especially Andhra Pradesh, may see a correction in the artificially pegged up prices if demand do not revive.

Cost pressure will limit the margins of manufacturers. From an average of around US$70 a tonne last year, global coal prices have reached US$107 a tonne. In 2011 pressures from rising fuel prices and higher limestone and fly-ash cost would increase and manufacturers who control cost effectively may report reasonable growth.