Near-term outlook positive

Near-term outlook positive
Published: 01 October 2004

The consumption of cement in India during the April-August period (for which the official figures are available) grew by 4% across the country. This lower than the normal growth rate is still a commendable performance considering the fact that the southern states, considered to be the economic power houses, posted a decline in consumption by 3.90% - say local reporters.

 All the major southern states registered lower off-take vis-a-vis the same period last fiscal. Andhra Pradesh’s consumption declined by 9%, Tamil Nadu’s by 8%, Karnataka’s by 2% and Kerala’s off-take remained flat. The lag impact of poor monsoon last year, low state spending and elections are causes for South’s lacklustre show.

 The lack of growth in this high consumption states was to an extent compensated by excellent growth in demand from Gujarat, Madhya Pradesh, Delhi, and Haryana. If one looks at region-wise performance, the South’s consumption declined by 3.9%, North grew by 8.50%, East by 6.50%, West by 3% and central India by 11%.

North and eastern India, where plants are already working to full capacity, will see sharp rise in prices. Industry analysts expect the average prices in north India to jump to Rs 175-180 levels per bag from around Rs 140 now.

Export of cement from India will soon see a quantum jump, especially to the Middle East. At $43 a tonne (FOB), exports would be quite remunerative. Larger exports will suck the excess supply in the western region and cause shortages in select pockets. This would benefit the South as cement from northern Karnataka and western Andhra Pradesh will flow into Maharashtra.  Demand from southern region itself is expected to grow once the monsoon ends in October.

 If the industry manages the estimated growth rate of 8% this year, the demand and supply would be even at 126Mt. With no major fresh capacities in the pipeline, demand could outstrip supply in the short-term thus pushing up prices to higher levels.