INDIA: Cement sales growth surges after three months

After three consecutive months of poor performance, the domestic cement industry managed to do reasonably well in September with sales growth of 6.04 per cent.

According to the latest statistics from the Cement Manufacturers’ Association, the September despatches were at 15.62 million tonnes, compared to 14.73 million tonnes in the corresponding month last year.

However, according to industry experts, this was not on account of a rise in demand. "It is primarily due to the low-base effect. In the same month last year, the sales had dipped to 5.82 per cent from 17.2 per cent on a month-on-month basis. Low growth last year helped the industry come up with a relatively higher figure this year," said the research head of a Mumbai-based domestic brokering firm.

In addition, on the production front, the industry did well with growth of 4.65 per cent — the highest in the last four months. However, while the industry’s installed capacity —270 million tonnes — is on the rise, actual production and sales are seeing a month-on-month decline (See table).

Officials say due to better monsoon this year and completion of Commonwealth Games’ projects, sales growth has slowed. But they are optimistic about the December quarter, when construction activity is likely to pick up.

Also, prices in several regions have started rising in anticipation of high demand. The southern region saw a Rs 25-30 increase for a 50 kg bag. A quick dealer check confirmed that in western, northern and central markets, companies had hinted at a rise of Rs 10-15 for a 50 kg bag.

With this, the average national price is at Rs 230-235 a bag. But experts differ on this strategy of cement makers. "Sustaining the price rise is a big challenge for players at a time more capacities are scheduled to go onstream in the second half of the year," said an analyst with a global broking house.

Unless large infrastructure projects took off, cement sales growth would remain under pressure, she added. "In such a scenario, it will not be easy to maintain high prices," she said.