Cement dispatches at all-time high in Andhra Pradesh

Cement dispatches for the month of December last year in Andhra Pradesh touched an all-time high of 1.6 million tonne, triggering off the demand-supply gap speculation in the state for the first half of the current financial year. The figure is 23 per cent higher, compared with 1.3 million tonne supplies effected during the corresponding month in the year 2005.

The total installed capacity of cement plants in the state is about 24 million tonne a year. Yet, the state is facing supply constraints as the companies here have to first fulfil their export tieups, which they had entered into with other states, industry sources say.

Meeting the increased demand in December was, however, not difficult. S R B Ramesh Chandra, president of the All-India Mini Cement Manufacturers Association, said the unutilised stocks for the months of September and October helped in meeting this demand over and above the per month availability of supplies in the local market from the manufacturers' end.

Dispatches during the last month saw a sudden jump in consumption levels, compared with October and November, when supplies were at 12.1 lakh tonnes and 12.6 lakh tonnes respectively as per industry estimates. Companies attribute the increase in demand to general consumption coming from housing and other sectors in the state. But they say consumption from government sectors like housing and irrigation are yet to catch up with the projected requirement levels.

Going by the current trend, the demand by March this year would be anywhere between 1.8 million tonne and 2 million tonne, says Ramesh Chandra. "The AP industry is not in a position to meet any demand going beyond the current levels," he told Business Standard. Any supplementation through stocks coming from outside the state is not expected to be very substantial on account of higher prices in these states, including Maharashtra from where Andhra receives higher volumes of imports in normal situations.

While the construction boom across the country has seen a drastic cut in cement imports into the state over the last couple of years, Ambuja and Ultratech, the only two outside players, are still having their presence in the state and maintaining their Andhra supplies at 41,000 tonnes and 27,000 tonne per month, the sources say. Reports reveal that the consumption levels in other southern states too have gone up 15-20 per cent during the past couple of months, compared with the corresponding period previous year.

The prices, which have already gone up by Rs 7-Rs 11 per bag across coastal Andhra and Rayalaseema regions and by over Rs 6 per bag in Hyderabad after November 2006, are expected to spiral if the demand continues to grow over the current levels. "The average retail prices may go up as high as Rs 220-Rs 225 per bag in the state if the demand further increases by March 2007," Chandra maintained.

According to him, any possible governmental intervention to contain the cement prices at the company level too may not work because the retailers are expected to take advantage of the demand-supply situation.