Cement industry fighting for survival due to low demand

Monday, 2 March 2015 00:20 - - {{hitsCtrl.values.hits}}

From left: Ultra Tech General Manager Technical Sandeep Holey, Ultra Tech Cement CEO Kiran Redker, Institution of Engineers Sri Lanka Civil Engineering Sectional Committee Chairperson Prabodha Jinasena and Institution of Engineers Sri Lanka Committee Member Niyas Samad – Pic by Lasantha Kumara By Charumini de Silva The cement industry is fighting for survival with paucity in new commercial construction activity leading to low demand, a top importer warned last week. “The industry is not as bullish as it was once. We are living with hope that the new Government will come up with a drastic policy direction for the construction and cement industry which would bring momentum back to the industry, otherwise it will be very difficult to survive,” UltraTech Cement Lanka Ltd. Chief Executive Kiran Redkar said. Redkar was speaking at a discussion on ‘Revitalising a growing construction industry in Sri Lanka and promoting consumer education,’ organised by UltraTech Cement and the Institution of Engineers Sri Lanka (IESL). He said during the post-war period as expected Sri Lanka went on a growth trajectory of 7%-8% of GDP, while the construction industry grew at about 18%-20%. “The trend continued for a few years and this construction boom was mainly generated from development of infrastructure and also in part by real estate,” Redkar added. “As per our observations as a cement seller, we do not see good growth in the construction industry. It is yet to pick up. We hope it will and that the industry can expect 15% to 20% growth,” General Manager – Technical and Quality Assurance Sandeep Holey added. CEO Redkar also said that although there had been a drastic drop in the interest rates, credit growth compared to the drop was of no consequence. “This is a very surprising scenario. Interest rates for housing loans had dropped from 20% to 9%, which is about a 40% to 50% reduction, but surprisingly people are still not borrowing money to build houses,” Redkar pointed out. Explaining further, he said that they did not think there would be much of a change in interest rates or inflation rates even after the upcoming general election. “I think we have reached the lowest levels of interest rates at present, where savings rates are at 3%-4% and fixed deposit rates at 6%-7%, while lending rates are around 8%-0%.” Nevertheless, considering the relatively low per capita cement use in Sri Lanka, Redkar said that there was tremendous scope for construction activities in the future. At present, Sri Lanka’s per capita cement use is 200 kilos per person. Holey also said that due to the non-availability of masons, contractors and labour, there is a tendency of utilising modern construction practices such as ready mix concrete.