Recent results in the Indian subcontinent have reflected slowdowns in recent cement sales with prices being under pressure in both markets.
After a strong performance in October, most major Indian cement producers posted negative dispatches in November. UltraTech was hit the hardest as its sales fell 9.25% to 2.66Mt. Holcim partner, Ambuja Cements Ltd (ACL), reported an 8.4% fall in November shipments to 1.42Mt, with deliveries affected by a transporters’ strike. Corresponding production volumes dropped to 1.44Mt from 1.51Mt a year earlier. Similarly, Shree Cement, a dominant player in the north, continued to feel the pressure as its dispatches were down 7.62% from 700,000t to 650,000t. The sales of JK Lakshmi, another north-based player, were down 5%. However, Holcim’s other Indian concern, ACC, bucked the industry trend with deliveries rising 4.8% from a year earlier to 1.74Mt and production up 4.8% to 1.76Mt.
The impact of weak month-on-month cement dispatches was evident in cement pricing levels. Nationwide during November, the average price of a 50kg bag corrected by around INR5. Prices hovered around INR235 (US$5.20)/bag in the month compared with INR240/bag in October.
The November figures indicate that the overall slump witnessed in the first half of fiscal 2010-11 is continuing. With the exception of the October 2010 results, when overall cement industry dispatches grew 18%, local consumption has been muted. Key reasons for falling demand include a prolonged monsoon and no major pick-up in infrastructure projects. The November performance, however, is partly attributed to unseasonal rains cross the country, the festival season of Diwali that traditionally leads to lower construction activity.
For the remainder of the current fiscal year, industry insiders say it might not be possible to achieve growth over 8%. Profitability of local producers is expected to be under pressure due to excess cement supplies in the market as further capacity comes on-stream. Moreover, with an export market already saturated, diverting excess supplies outside India is less of an option.
Similarly, the Pakistan cement sector has seen a deceleration with overall dispatches in the first five months of the current fiscal year down 12%, according to the All Pakistan Manufacturers Association (APMC). Domestic sales fell 8.92% between July-November 2010 to 8.3Mt compared to 9.1Mt in the same period of last year with recent floods the major reason behind the decline in local dispatches. Cement sales for November.