India: fal in cement output helps companies hold prices

India: fal in cement output helps companies hold prices
Published: 19 September 2008

The sharp fall in cement production in August seems to have helped companies hold the prices despite the slump in demand in select pockets.

Production in August was down 10.23 per cent at 13.16Mt 14.66Mt in July as capacity utilisation dropped to 77 per cent against 87 per cent in July, while it was 88 per cent in August 2007.

Incidentally, cement production at Aditya Birla Group companies – Grasim Industries and UltraTech Cement – as down 8.87 per cent at 2.12Mt in August while dispatches dipped 5.39 per cent to 2.19Mt compared to the same period last year.

Similarly, ACC has reported a 5 per cent fall in production at 1.52Mt in August against 1.6Mt in the same period last year.

Dispatches dropped 1.91 per cent at 1.54Mt (1.57Mt).

Between April and August, cement production in Gujarat was down five per cent as compared to the same period last year.

In Punjab and Himachal Pradesh, it dropped by 12  and 13 per cent, respectively, while in West Bengal it was down by nine per cent, according to Cement Manufacturers’ Association data.

In the western region, which includes Gujarat and Maharashtra, production was down 2 per cent, while the southern region, including Andhra Pradesh, Tamil Nadu and Karnataka, registered a growth of 11 per cent.

“he prices in Chennai were up Rs 13 for a 50 kg bag to Rs 276. In the southern region, Tamil Nadu registered the lowest growth in production at 7 per cent compared to Andhra Pradesh 14 per cent and Karnataka 12 per cent. Moreover, demand in southern States was good,”aid an analyst.

In Kolkata, prices increased by Re 1 at Rs 252 per 50 kg, while it remained unchanged at Rs 253 in Mumbai, he added.

According to the latest report of the Centre for Monitoring Indian Economy (CMIE), cement companies have been able to pass on the cost burden in the southern region, in view of the continued buoyancy in cement consumption.

Eastern region

Production in the eastern region —eghalaya, Uttar Pradesh, Bihar, Madhya Pradesh, Jharkhand, Orissa and West Bengal —as up 4 per cent.

However, the full impact of capacity additions made at the end of last fiscal will come into force in the next few months, thereby capping future price rise.

Companies have been able to pass on the cost burden in the southern region, in view of continued buoyancy in cement consumption.