Capacity Utilization

Utilisation says how full the factory is. At low utilisation, fixed costs are spread over too few units and margins suffer. As utilisation rises, margins usually rise until the plant is tight.

Companies in cement, steel, power, chemicals, and autos often disclose it. The definition of capacity, nameplate versus practical, changes the percentage.

Rising utilisation toward a level the company considers full is the fundamental case for a capacity expansion. Expanding while utilisation is falling needs a different explanation.

Nameplate capacity can be unreachable in practice because of maintenance, mix, or power. A reported 95% can mean there is no room, or that the denominator was set low.