India: cement dispatches to log 5-7% growth in February

India: cement dispatches to log 5-7% growth in February
Published: 08 March 2011

Cement deliveries grew marginally in January this year by 1.4% YoY and are expected to rise 5-7% YoY in February, according to experts. This upturn comes after a 3% YoY decline in December and 6% in November last year.

The initial set of numbers indicate a mixed performance of dispatches for the sector, where ACC registered an impressive performance with a strong 17% growth, whereas UltraTech Cement and Ambuja Cement’s deliveries grew in the range of 4% - 5%. According to industry players, infrastructure activity is driving the increase in cement sales. However, experts are of the view that demand from government projects has been slow and the rise in cement deliveries during February was due to re-stocking.

This, experts feel is due to the rise in cement prices by INR20–60 (US$0.44-1.33) per bag in the past two months and possibility of further price hikes in the coming weeks.

“In terms of demand, dealers have confirmed that cement sales are picking up except in the southern region. In Maharashtra the key concern of poor availability of river sand has been resolved to a great extent with supply of river sand coming in from Karnataka, Gujarat and Maharashtra itself,” a Sharekhan report adds.

Over the past two months, cement prices have climbed by 8%-25% per bag across regions, with a rise in all-India average prices by 16% in the last two months.

“On a YoY  basis, however, all-India average prices have grown by only 9%, trailing cost increases. Key cost items such as coal and freight have risen sharply,” said J Radhakrishnan, an analyst with IIFL, in his report.

Experts have, however, maintained their negative stance on the sector as the key concern remains in terms of oversupply due to capacity addition and increasing input costs.