It's pouring profits on cement

Prices remain steady during monsoon, inventory dips to 6-year low.

It is a different monsoon for the cement industry this time. Prices have reached a record high of around Rs 175-180 per bag in most states; despatches "" a measure of demand "" have improved sharply; and inventory for clinker, an indicator of supply and demand, has come down to a six-year low.

Cement despatches were at a record high at the end of the last financial year. They have risen further in the first quarter of this year. All major companies "" Grasim, UltraTech and ACC "" recorded higher despatches in the quarter ended June compared with the corresponding period of the last year.

The Aditya Birla group, which owns Grasim and UltraTech, recorded a 11.24 per cent growth in despatches to 7.22 million tonnes from 6.48 million tonnes during the same period last year. ACC recorded a 10.68 per cent growth in despatches to 4.56 million tonnes, up from 4.12 million tonnes in the same period in the previous year.

Anil Singhvi, executive director, Gujarat Ambuja Cement, said the good time for the industry was a combined effect of the retail housing "boom" and an absence of fresh capacity-expansion. The industry witnessed capacity-expansion by Sanghi Cement last year.

The Kolkata-based Bangur-controlled Shree Cement will add a 1 million tonne capacity early next year. At the moment, the industry produces nearly 140 million tonnes a year.

There has been no price cut in any part of the country this monsoon. This is highly unusual as the demand traditionally falls during the monsoon leading to a fall in prices. "I can't recall any monsoon without a price cut," Singhvi added.

The inventory for clinker is around 4 million tonnes against an average of 5 to 5.5 million tonnes. The current inventory level can hardly meet the raw material demand for 12 days.