Indian cement shipments buoyant in the north

Indian cement shipments buoyant in the north
Published: 31 December 2009

The December quarter may see yet another period of strong numbers from Indian cement producers. However, a disparity between regions is likely (reports Business Line).

Helped by good volumes, steady demand from government-led infrastructure projects and price increases, companies in the North and East may report higher profits. However, players in South could see slower growth in the light of surplus capacities in the region, price corrections and the recent political crisis in Andhra Pradesh.
Northern cement companies may see both realisations and despatches support strong sales numbers this quarter. Prices have been Rs 10-12/bag higher (y-o-y) in the North and over Rs 20/ bag (y-o-y) in the East on the back of steady growth in demand. While industrial projects support demand in the East, construction related to the Commonwealth Games and other infrastructure related spending by the government have been helping demand in the North. Players such as Grasim Industries, UltraTech Cement and Shree Cement have reported a 10-14 per cent increase in offtake in October and November.

Southern cement companies could, however, report lower sales growth than the industry with lower prices impacting realisations. Volume growth in the region was reasonable on a low base effect. India Cements, the largest player in the South, has clocked a 30 per cent growth in despatches for October and November. The company’s despatches were down 8 per cent in the same period in 2008.

The southern pocket has seen price corrections with new capacities bunched up in this region. Of the total of 21.4 million tonnes of capacity added in FY09, 16.1mt were additions in the southern India. Cement prices on an average corrected by about Rs 10-15/bag (to Rs 250/bag at present) in the region. Prices in Andhra Pradesh are reported to be far lower at about Rs 170/bag.