A more-than-proportionate rise in capacity compared to despatches will flood supplies in the market and put downward pressure on prices, says the economic think-tank

Cement prices are expected to remain weak in the March 2010 quarter and decline further in 2010-11, economic think-tank Centre for Monitoring Indian Economy (CMIE), has said, reports PTI.

"We expect prices to remain weak in the March 2010 quarter and decline further in 2010-11," CMIE said.

As new capacities stabilise, these will effectively contribute to cement production in 2010-11. Another 38.4 million tonnes (MT) of fresh capacity will come on stream during the year. Healthy demand and aggressive capacity addition will boost production by 13% in 2010-11.

However, a more-than-proportionate rise in capacity compared to despatches will flood supplies in the market and put downward pressure on prices. Capacity addition of 21MT during April-September 2009 has already triggered a fall in cement prices in the second half of 2009.

Prices in the north and west zones fell by 3%-8%, while the decline in the southern regions was sharper by 15%-20%, it said.

However, with the onset of the peak construction season, cement dispatches are expected to grow briskly at 12.8%, CMIE said.