India: prolonged monsoon to dampen cement consumption growth

India: prolonged monsoon to dampen cement consumption growth
Published: 26 November 2010

A prolonged monsoon has hit cement consumption growth in India hard. The sector, which had recorded 10.5 per cent growth last fiscal year over the previous one, is expected to manage only around 6.5-7.5 per cent growth this fiscal.

"Cement consumption is not going to match the last year’s growth rate. During the first half, growth was only 5-6 per cent over the corresponding period last year. We are expecting 8-9 per cent growth in the second half," J K Laxmi Cement Whole-Time Director Shailendra Chouksey said.

Chouksey attributed the anticipated fall in consumption growth to the ’all-pervasive’ prolonged monsoon, which stood at 102 per cent of its long period average of 89cm.

Monsoon started on May 17 this year, three days prior to the normal date and began withdrawing on September 27, with a delay of nearly four weeks.

Cement consumption had grown by 10.5 per cent in 2009-10 fiscal year. According to a recent report by brokerage firm Elara Capital, consumption of cement grew by only 4.9 per cent in the first half of the current fiscal year.

Elara Capital, however, is more optimistic, as it pegged the overall cement consumption growth in the current fiscal at 8 per cent.

"We believe, the demand will accelerate in the coming months on the back of higher demand from infrastructure and construction sectors," it said, adding that the demand would grow by 10.4 per cent in 2011-12 and 2012-13 fiscals.

During the July-September quarter of the current fiscal, almost all major cement makers had reported dip in net profit due to increased costs on input and freight in the face of suppressed demand.

The situation is likely to improve in the remaining period of the current fiscal with the elapse of the monsoon period, which is traditionally considered as a lean period for the construction activity.