Cement prodn now free from weather moves

The seasonality in cement production is increasingly becoming a thing of past for the Indian cement producers. Gone are the days when the cement companies used to curtail production between April and July to avoid a market surplus that could force them to reduce prices.

The practice of regulating production to maintain prices is becoming extinct as companies are witnessing a buoyant consumption demand even in the months of July and August and therefore the cut in production between April and July has become marginal.

In the past, cement companies have seen a slump in consumption demand during the months of June and July. Therefore, the companies used to cut production by 15 per cent to ensure that there is no surplus and prices remain stable. 
 

STRONG FOUNDATION
Year	Cement production in
	April	May	June	July
ACC
2005	15.34	15.65	14.45	12.91
2006	16.60	15.70	15.30	14.70
2007	17.70	18.20	17.00	16.30
GACL
2005	11.30	11.04	10.89	9.45
2006	13.20	13.15	12.19	10.43
2007	15.01	15.04	14.10	14.00
Jaypee
2005	4.89	5.26	5.08	4.15
2006	5.53	5.56	6.20	5.51
2007	5.09	6.51	6.18	5.52
(Figures in lakh tonnes)

On an average, leading cement companies cut down production by 15-16 per cent between April and July in 2005. However, this has come down to as low as 6-8 per cent in the current year.

Demand for cement has been buoyant, driven by large amount of infrastructure and housing growth in pockets like Noida, Gurgaon, Chennai, Hyderabad, etc. The sustained demand even during the months of rain is something that helped most cement producers to go ahead with a price hike of Rs 3-5 per 50 kg bag in July.

"For the past two years, cement consumption demand has not seen any impact owing to monsoon and therefore prices have not come under pressure," said AK Saraogi, chief financial officer, JK Cement.

Domestic cement production in the April-June period of the current year has seen a growth of 6.91 per cent over last year and consumption demand has been equally good despite the rains.

According to the Cement Manufacturers' Association, cement production and despatch in the April-June period of the current financial year has been 41.88 million and 41.7 million tonnes, respectively, up 6.91 and 7.33 per cent over last year's corresponding figure.

Though the July figures are not available, the data of individual companies for July point to a similar trend of increase in production and despatch figure over last year.

"Though the consumption demand is sluggish in certain markets in East and North India owing to rains, the overall demand is better than last year," said Rahul Kumar, chief operating officer, Jaiprakash Associates.