Cement export price hits all-time high

Thanks to the construction boom in the Middle East on the back of robust oil prices, international cement prices have hit a record high. Cement exports out of India are now fetching around $46 per tonne, the highest ever, giving a boost to coast-based cement manufacturers.  In fact, with export prices having doubled during the past one year, the average realisation for domestic players in the international markets has, for the first time, edged past the average realisation in the domestic market – reports the Economic Times of India.

Domestic players say the demand for cement has been very robust, primarily from the Gulf countries, and indications are that export prices could get close to $50 per tonne in the coming months.  Export prices of clinker, an intermediate product, have also moved in tandem and are currently ruling at around $32 per tonne.  "Because of our location, we are well placed to take advantage of the construction boom in the Gulf.

Export prices of cement have gone up sharply in recent months and export realisations are currently higher than our realisations in the domestic market," said Anil Singhvi, executive director, Gujarat Ambuja Cements.  For cement exporters, the current export prices (FOB) at $46 per tonne translate to over Rs 100 per bag.

Average domestic prices, on the other hand, are currently pegged at around Rs 145 per bag, which, excluding the tax levies and freight, translates into a net realisation of less than Rs 90 per bag for the cement manufacturer.  Gujarat Ambuja, the largest cement exporter, posted a 40% rise in export volumes during June-September ’04 to 7.3 lakh tonnes. The company expects to scale up exports past 2Mt this fiscal from 1.7Mt a year ago. 

Industry observers say, with oil prices shooting past $50 per barrel, the construction activity in Gulf countries could get an added momentum.  Domestic exporters who are expected to reap higher export volumes include West coast-based manufacturers such as Ultra Tech Cement, now a subsidiary of Aditya Birla group flagship Grasim Industries, Saurashtra Cement and Sanghi Industries.

Total cement exports from India were 3.3Mt in ’03-04, while clinker exports stood at 4.7Mt.

Said a senior Sanghi Cement official, "With prices heading northwards, we are currently exporting around 2 lakh tonnes of clinker and around 80,000 tonnes of cement every month. Bulk of our consignments are being sent to Dubai, Qatar and Saudi Arabia."  Even as the export demand is on an upswing, it’s only the cement players with coast-based facilities who are looking to take advantage of the situation.  However, given the ’high volume low value’ nature of the industry, players find it difficult to drive up exports due to infrastructure and logistics problems.

Over the years, addition to clinker capacity in the international markets has not kept pace with the growth in grinding capacity. This, say analysts, is driving the demand for clinker in international markets.  Meanwhile, Associated Cement Company (ACC), the largest cement producer, posted a 6% rise in cement despatches in September ’04 to 1.3m tonnes, while cumulative dispatches during April-September ’04 rose 6% to 8Mt.

Grasim Industries posted a 12.6% rise in despatches last month to 1.16Mt, while Ultra Tech Cement, its subsidiary, reported a 4.3% decline in monthly dispatches to 1.24Mt.  Gujarat Ambuja Cements, the third largest cement maker, has said its cement despatches last month shot up 23% to 1.2Mt. Cumulative despatches during July-September ’04 stood at 3.3Mt, as against 2.9Mt last year.