Domestic cement companies registered a phenomenal sales growth in October, despite a lull in major infrastructure projects. The 275 million-tonne industry witnessed a rise of 18.54 per cent in its sales volumes at 18.22 million tonnes of cement.
This is the highest since August last year, when the industry grew a little over 17.2 per cent. Generally, such high growth is recorded in the peak months when construction activities increase (January-March).
Production, too, was on the rise to 18.75 per cent at 18.49 million tonnes in October.
Industry experts said the growth is not on the back of real demand, but an artificial demand prompted by stocking up of building material by dealers and consumers anticipating a further price rise in the coming weeks.
In a note, India Infoline said, “A low base in the previous year, seasonal improvment in demand and re-stocking demand on account of rising prices is likely to have increased despatch growth.”
According to cement dealers, end-user demand, particularly in the residential segment continues to be sluggish, due to a sharp rise in prices over the past few months.
In October, the national average price of the building commodity rose by Rs 20 from Rs 220 to Rs 240 for a 50 kg bag.
Industry analysts said this was due to a disciplined approach of the companies. Sources had told Business Standard that the south-based cement manufacturers had reached a consensus for a production cut to maintain prices before the start of the current quarter.
“This is not the true demand scenario. Couple of few more months would bring the real picture,” said a Mumbai-based cement analyst.
Industry experts said there was no justification for cement stocks to rise as demand was not on the recovery mode. “Moreover, ability to sustain price hikes is questionable as more and more capacities go on stream resulting into oversupply.”
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