The export ban on cement in India has led to a fall in prices, hitting the industry hard. This has also led to a free-fall in prices of cement stocks, which had been at the top of the bourses when a mismatch in demand and supply favoured the firms’ earnings a year ago. With Gujarat contributing the maximum to the industry’s exports, the state is being the hardest.
Cement stocks have fallen in the range of 4% to 16%, while the BSE’s benchmark index Sensex has gained almost 7% since the April 11 ban. Industry heavyweight Ultratech Cement lost the most, plunging by 15.7% over the past month. The company has a major share in exports, along with Ambuja Cement. The Centre banned cement exports in April to curb the price of the commodity, which was fuelling housing costs.
The ban has resulted in the cost of bulk purchases falling by Rs4-6 per 50kg in Gujarat. In the retail market, however, prices are hovering at the pre-ban level. "Prices have softened by around Rs6 per bag in the state, owing to the export ban. This is primarily for bulk cement, normally bought by institutional clients. The demand has also taken a hit as consumers are expecting a further drop in prices, and this has increased the supply in the state," said a local dealer. He added that firms have not cut down production and the excess supply is being routed to other states such as Maharashtra, and Rajasthan where prices are higher.
"The ban on exports and the price cut in a few markets are pressurising cement stocks. In addition, the cement cycle is coming to an end as capacity additions hit the market in the current fiscal limiting the upside in prices," said Pawan Burde, cement analyst, Angel Broking Ltd. Burde added that although demand is not expected to slow down, capacity addition and production growth will increase the supply, altering the current supply-crunch scenario.