The domestic cement industry has seen robust growth since the start of FY10. The persistent high demand has seen the industry hit a five-year high in despatch growth in April. At a time when other manufacturing sectors are showing poor growth, cement sector has been an outperformer since November last year.
The 212-million-tonne cement industry — world’s second largest after China — despatched 16.65 million tonnes during the month, registering a growth of 13.03 per cent, the highest since February, 2008. It was during April, 2004, when industry despatch was hit 17.85 per cent.
| STRONG GROWTH |
Source : Cement Manufacturers' Association
The previous financial year had begun with a muted despatch growth rate of 6.12 per cent in April which subsequently slumped to 3.78 per cent in August before it finally surged in November.
Speaking to Business Standard last week, Amrit Lal Kapur, managing director, Ambuja Cements, had said FY10 might see a similar growth of 8 per cent as was in the previous financial year. “We are positive on cement demand growth,” he added.
It is the first-ever positive outlook from the industry for the present year at a time when apprehensions persist about oversupply in the second half. This is in contrast with the industry analysts’ view who expert the sector to grow by 6 per cent in FY10.
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Since the beginning of the year, the monthly despatch growth (year-on-year) has continuously inched up from 8.26 per cent in January to 8.73 per cent in February which later jumped to 10.35 per cent in March, the month when the industry touched historic highs of 18.12 million tonnes.
Pawan Burde, research analyst at Angel Broking, said, “It is an optimistic growth for the sector on account of good demand from infrastructure projects, rural housing and pre-election spending. However, it is premature to say if the same growth will be sustained for the entire year.”
ACC, the country’s largest cement maker had a despatch growth rate of 4.05 per cent in April whereas Ambuja Cements registered a rise of 10.74 per cent. The cement despatches of Aditya Birla group, comprising UltraTech Cement and Grasim, in April jumped 17.43 per cent while the cement major from north Shree Cement’s despatches surged a steep 28 per cent.
“Partially, the dramatic rise in April despatches is due to the low base last year because of the export ban which came into effect during the same period last year, thereby impacting despatches,” said another industry analyst, who did not wish to be named. The government had put an overall ban on cement exports on 11 April 2008 which subsequently was partially removed by May-end.
The price hike of Rs 12-15 for a 50 kg bag of cement during the March quarter of FY09 is helping cement makers reap the benefits. The market players have always maintained that pricing of cement is the function of supply and demand.
It is learnt the government is unhappy with the cement prices hikes and may consider withdrawing some benefits to the sector.
The government had come up with two stimulus packages which also benefitted the cement sector with excise duty cuts and re-imposition of counter-vailing duty (CVD) on the imported cement from Pakistan.