Despite robust international prices on the back of a construction boom in the Middle East, cement exports from India, which saw a major surge in the recent months, have begun to slip for the first time. Exports have taken a backseat as West Coast-based cement manufacturers are busy fighting for market share in Gujarat, even though export realisations continue to be more attractive.
Manufacturers say that high freight rates and non-availability of ships are also posing major problems for those seeking to export cement. In fact, after a steady 24 per cent jump during April-October ’04, total cement exports for the first time declined to 330,000t last month, against 350,000t during the corresponding period last year. Export of clinker, also declined rather sharply from 570,000t to 430,000t during the period. Ironically, the slowdown in exports comes at a time when international cement export prices are ruling at around US$42 per tonne, which is higher than average domestic realisations for Indian cement manufacturers. Clinker prices have also risen sharply to around US$30/t. During April-November, total cement exports rose to 2.7Mt, up from 2.2Mt. Clinker exports surged from 3.1Mt to 3.8Mt during the period.
Anil Singhvi, executive director, Gujarat Ambuja Cements, said, "The current dip in cement exports is largely due to logistics problems. Besides, with a pick-up in cement demand in Gujarat, manufacturers are focusing more on the domestic market." Gujarat, which is the export hub, has been worst affected in terms of realisations, as domestic cement prices tumbled by Rs 35-40 per bag in recent months, largely due to "intense rivalry" among existing players for higher market share. It is this urge of manufacturers to sell more cement in the state, coupled with a spurt in demand, which boosted cement dispatches by over 50 per cent to almost 1Mt last month.
According to industry observers, Sanghi Cements has more than doubled its market share to over 20 per cent in the state, which has prompted its bigger rivals to protect their share of the market. Gujarat Ambuja Cements and the Aditya Birla group-controlled Ultra Tech Cement have a market share of around 22 per cent each in the coastal state.
Gujarat Ambuja Cements, with manufacturing facilities in the coastal state of Gujarat, is the largest exporter of cement, while Ultra Tech Cement, the erstwhile cement division of Larsen & Toubro which is now a Aditya Birla group subsidiary, takes the lead in exports of clinker.
Cement manufacturers said that even as demand from the Gulf countries continues, thanks to a surge in construction activities boosted by the sharp increase in oil prices, they would not want to lose out on market share on the domestic turf. Besides, Indian manufacturers are also shipping cement and clinker to African countries and Sri Lanka. In Sri Lanka, both Gujarat Ambuja and Ultra Tech operate through majority-held subsidiaries.
More importantly, only a handful Gujarat-based manufacturers are in a position to export cement. Given the complexities of shipping out a "high volume low value" commodity like cement, most cement manufacturers find it difficult to drive up exports due to infrastructure and logistics problems.
Apart from Gujarat Ambuja and Ultra Tech Cement, the other domestic exporters include West Coast-based manufacturers like Saurashtra Cement and Sanghi Industries. Total cement exports from India aggregated 3.3Mt in FY04, while clinker exports stood at 4.7Mt.