Cement despatches in TN grow 22 % in Q1

Tamil Nadu has recorded a 22 per cent growth in cement despatches in the first quarter of 2005-06, outstripping the national growth on the back of demand from the construction industry.

Robust demand, however, has not influenced the cement price in Tamil Nadu. The price has remained more or less stable during the period with the existing manufacturing capacity adequate to meet the growth in demand.

Data from the Cement Manufacturers' Association showed that dispatches in South India grew by 20 per cent in the first quarter of 2005-06 to 8.7 million tonne. Countrywide dispatches grew by 10 per cent during the same period to record 32.7 million tonne.

The current trend has run counter to the previous year's situation. Last financial year, the growth in south India trailed the national growth. In the first half of 2004-05, cement dispatches in south India were lower than that of the preceding year.

South India's (for this purpose Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Goa, Pondicherry and Andaman & Nicobar) major markets drove the demand for cement in the first quarter.

In absolute terms, the cement dispatches in Tamil Nadu , the biggest cement market in south India, stood at 2.4 million tonne, a little over 25 per cent of the total dispatches in south India.

According to industry sources, the growth in Tamil Nadu was driven primarily by the construction sector. Industry hands said that the state had not seen a significant offtake from the infrastructure sector.

The cement price trend, however, did not follow the pattern of demand in Tamil Nadu. Cement dealers said that the average prevailing price for a bag of cement (50 kg) was about Rs 10 to Rs 15, lower than the price that existed in the beginning of the year.

Dealers said the average price of a cement bag in Chennai currently ranged between Rs 135 and Rs 145. Chennai's demand made up about 25 per cent of Tamil Nadu's demand, they said.

The average price of cement bags in the rest of Tamil Nadu is higher than that of Chennai. The average price in rest of Tamil Nadu ranged between Rs 150 and Rs 160, they added.

According to a dealer, the main reason for the variation in price was because of the influence the producers based in Andhra had on the Chennai market. Almost 50 per cent of the demand in Chennai was met by cement brought in from Andhra, he added.

Another factor which has had an influence on cement price in Tamil Nadu was the differential tax system in the state. Cement bags priced above Rs 135 attract a higher level of tax.