India: cement cos’ inventory dips, outlook still bleak

India: cement cos’ inventory dips, outlook still bleak
Published: 04 December 2008

Despite a gloomy outlook, cement major ACC, Ambuja Cement and Aditya Birla Group have managed to bring down inventories marginally in November on the back of revival in export demand and a moderate pick up in sales in the southern States.

Mr A.L. Kapoor, Managing Director, Ambuja Cement, said if not for the congestion of ships in West Asian ports, the company would have managed to export more than last month. Ambuja Cement exported 80,000 tonnes of cement and clinker in November against one lakh tonne in October.

Exports were also affected after the traffic from Gujarat port – the major hub for cement and clinker shipments – was suspended temporarily after the terrorist attack in Mumbai on November 26.
Sales rise

ACC dispatched 1.73 million tonnes (mt) of cement even as it produced 1.70 mt in November. Production was up seven per cent to 1.70 mt from 1.59 mt logged in the same period last year, while dispatches improved nine per cent to 1.73 mt from 1.58 mt in November last year.

Ambuja Cement production rose five per cent to 1.46 mt (1.40 mt) while dispatches jumped nine per cent to 1.47 mt. Cement sales were higher than production, indicating that the company has reduced inventories.

Aditya Birla Group, which includes Grasim and UltraTech Cement, sold 2.54 mt of cement in November while it produced 2.50 mt.

Production at ACC and Aditya Birla Group were down when compared on a month-on-month basis. In October, ACC produced 1.74 mt against 1.70 mt in November, while in the Aditya Birla Group cement output was marginally down 2.30 per cent month-on-month basis.

Mr Kapoor said “there is no dramatic rise in demand. On a few occasions, we had to cut down production as there were no place to store, godowns are overflowing”.
Realisation down

Though companies managed to cut down inventories, realisations remained flat. On the export front, prices fell by 15 per cent.

“We were exporting at $62 a tonne, but the prices have come down to $52 to $55 a tonne in November,” he said.

In the domestic market, except for the southern region, there has been demand stagnation across the country.

Prices dropped in the northern region due to large scale imports from Pakistan amid slowdown in housing and infrastructure activities, while in the west it remained flat even as builders cancelled bulk orders, said an analyst.

“Many cement companies were willing to offer discounts on bulk purchases by builders, but there were few takers. Hit by credit crunch and lack of demand, builders are postponing their new projects, leading to order cancellations,” he added.