Chennai: The cement industry appears to be heading into a period of persistent capacity overhang, with supply expected to grow faster than demand. The industry’s installed capacity is projected to rise from 654 million tonnes (mt) a year in FY25 to 702mt in FY26 and about 867mt by FY29.Demand, though healthy, is expected to grow more slowly. The result is likely to be a persistent capacity overhang, with capacity utilisation remaining below 70% through FY29, according to Kotak Institutional Equities.Cement makers are expected to add 42mt of capacity in FY27, 67mt in FY28 and another 56mt in FY29. Over the same period, consumption is forecast to rise from 486mt in FY26 to 596mt by FY29. Consumption growth, after reaching an estimated 8.7% in FY26, is expected to settle at about 7.1% a year during FY27-FY29.“We do not see any meaningful improvement in the supply-demand situation for the next few years,” Kotak analysts said.However, there is little sign yet of a decline in demand. Cement production has recorded year-on-year growth for 13 consecutive months, from August 2025 to August 2026, and grew at a double-digit rate in August, according to the latest RBI Bulletin. Production is expected to broadly track consumption, rising from 490mt in FY26 to around 601mt by FY29.As a result, capacity utilisation is expected to remain in a narrow 68%-70% range as new plants come on stream faster than the market can absorb them.The expansion is being led by the industry’s largest companies. UltraTech Cement’s share of domestic capacity has increased from 21% in FY21 to 27% in FY26, despite easing slightly from 28% in FY25. Its domestic manufacturing capacity is expected to rise to more than 240mt by FY28.Other large producers are expanding too. Ambuja Cements has increased its capacity share from 12% to 15% and plans to lift consolidated capacity from about 110mt to 119mt by the end of this fiscal. Shree Cement’s share has risen from 8% to 10%, and it plans to reach 80mt of domestic capacity over the medium term, compared with about 69mt in June. Dalmia Bharat is targeting 67mt by FY28, while J K Cement plans to reach 50mt by FY30 from about 32mt now.The trend suggests that cement makers may have limited pricing power over the next few years, as a steady pipeline of new capacity keeps supply ahead of demand growth.
