Indian Cement firms see reduced growth

Domestic cement makers have scaled down growth expectations for the industry in the current fiscal to around five per cent from 8.5 per cent registered last year.  Last year, the total volume of business was to the tune of 111Mt, according to figures released by the Cement Manufacturers Association (CMA).  In the first 11 months of the current fiscal (April-February), the volume of business is close to 105Mt.  Industry officials have cited depressed demand owing to a prolonged monsoon as the main reason for a low pick up in demand.

"Traditionally, the growth in cement demand is linked with the country’s gross domestic product (GDP) growth. It is always one-a-half times the GDP growth. In the beginning of the year, the GDP was expected to grow at 6-6.5 per cent. Based on that, cement demand was expected to grow at close to 10 per cent," said an industry analyst.  Since then the GDP growth estimate has been revised upwards. Last month Union finance minister Jaswant Singh had said the third quarter GDP growth was to the tune of 8.9 per cent.

Anil Singhvi, executive director, Gujarat Ambuja Cements, said, "We are expecting the industry to grow at the rate of around five-six per cent this year." As per the monthly despatches figures released by the CMA, the industry clocked a double-digit growth in February at 10.75 per cent.  However, a cement sector analyst said, "The industry grew at the rate of four per cent in the first eight months of the financial year. Therefore, even a robust and a double-digit growth in the last four months will result in an annual growth rate of around five per cent only."

A K Jain, executive director, ACC, said, "The demand growth this year is likely to be around 5.5 per cent due to a good monsoon."  "If the industry growth is less than 8-10 per cent in the next four months, then the situation could be a bit worrisome," he said.

Analysts said that cement demand had also failed to pick up in the post-monsoon months of October and November, which had brought down the overall growth rate. However, a lower demand pick-up has not dampened the price situation in most major markets. "The current prices are around five-six per cent higher in major markets such as Mumbai and Gujarat, compared with the prevailing prices a year back," Singhvi said.