India: cement despatches up but demand still slow

India: cement despatches up but demand still slow
Published: 17 October 2008

Cement despatches may have grown in September after a lull, but demand is yet to pick up. While north India is showing signs of revival and the south continues its cement-hungry streak, other parts of India haven’t snapped out of sluggishness.

Analysts said that demand in north has picked up somewhat after the September quarter. Due to this, cement makers may increase prices from Rs 245-248 per bag now.

Fuelling the demand is a fall in imports from Pakistan after the hike in freight charges and global prices of pet coke and coal. Pakistan exports are now going to the Middle East, leaving the northern market open for domestic players.

Said an analyst with a Mumbai brokerage, "Domestic players are also looking to apply their own label to cement imported from Pakistan. They hope to sell these as their own at higher prices in the Middle Easter where demand is high now. The capacity addition in Gulf will yield results only by FY10. Till then, Indian players can cash in on the demand."

While north India is likely to see a hike in prices, those in central parts of the country may fall, the analyst said. "The prices for cement bags in central states have already seen a drop of Rs 3-5 per bag year-on-year. This may go down further for lack of demand," he said. Eastern India isn’t much better off. Said a cement dealer from Kolkata, "The price per bag of cement fell Rs 2-3 early September. Demand is not high because of the festive season and because construction has slowed down in the realty sector. We expect a further price cut early November if demand doesn’t pick up."

The dealer said that cement manufacturers ACC and Lafarge are selling at the highest price of Rs 248 per bag. "Wholesale prices had gone down by Rs 4. There are smaller companies selling at lower rates but they are mainly local players," he added.

Meanwhile, the western market has seen a dip of 1.6% year-on-year in demand, said an October 15 report from domestic brokerage Anand Rathi. The report attributes the decline to slowing demand from government organisations and real estate.

The only good news is from south India, where India Cements, Madras Cements, Dalmia Cements (Bharat) Ltd and JK Lakshmi Cement have already raised prices. At Rs 253-255 per bag, prices are the highest in this region.

An analyst said, "Chennai is seeing the maximum amount of construction in India. So demand matches supply. But if projects are delayed, demand will fall."