Cement exports from the country is set to register 20% growth in the current financial year. The export growth is primarily driven by an increase in cement consumption in the Middle East, including the demand arising from reconstruction activities in war-torn Iraq.
Total cement exports, which was 10Mt in 2004, is expected to touch 12Mt in 2005, according to industry sources. Indian cement companies had a combined production of 117Mt, of which around 8% was exported in the year 2004-05.
According to figures from the Cement Manufacturers Association (CMA), for the four month period April-July 2005, cement and clinker exports was at 2.91Mt, up from 2.54Mt in the same period, in 2004. Cement prices in the export market has also risen from US$35 per tonne to US$45 this year, allowing manufacturers a better price realisation.
“Earlier, with surplus domestic capacity and low demand in the domestic market, we had no choice but to export at prices as low as $35 per tonne. Today the domestic price, minus the duties, is at $44 per tonne,” says Jayesh Doshi, assistant vice president, Treasury, Gujarat Ambuja Cements. The company exported 1.75 m t of cement in 2004-05 and expects to export 2 m t in 2005.
“What we are witnessing now is the same kind of situation that existed 10 years back. Some of the middle eastern countries are short of cement capacity and are importing from India at attractive prices,” said DD Rathi, CFO, Grasim Industries.
The main beneficiaries as a result of this boom are companies like UltraTech and Gujarat Ambuja which have their production facilities near ports enabling them to switch between domestic supply and exports, based on where the demand is from. With one-third of its cement production coming from its facilities near the Gujarat port, UltraTech Cement has been exporting 22% of its total production of cement.