Cement shares tumbled today after the central government abolished customs duty on ordinary portland cement yesterday. India Cements plunged nearly 9% (Rs 21) to Rs 221. ACC dropped over 7% (Rs 79) to Rs 1,037. Gujarat Ambuja slumped 6.7% (Rs 10) to Rs 137. Ultratech dropped over 4% (Rs 52) to Rs 1,059, and Grasim shed 3% (Rs 89) to Rs 2,805.Portland cement accounts for only 32% of production in India. It is blended cement that accounts for majority of the production, and the customs duty on blended cement has not been changed.Analysts reckon that cement prices in only a few regions, mainly Bangladesh and Sri Lanka, could be impacted due to the increase in imports following the lifting of import duty. Cement being a bulky commodity with freight costs accounting for a large portion of cost, prices in the interior regions are unlikely to be affected. The cement industry reported 8% y-o-y growth in despatches to 135.3 lakh tonne in December 2006 when compared with a 13% growth in November 2006. The slowdown in December 2006 , however, was largely due to a higher base in December 2005. With busy season likely to begin for the construction sector, cement prices have been forecast to go up in the coming months. About 75 million tonne of capacity addition planned continues to be a major long-term risk for the industry.
