All-India cement prices saw a marginal improvement in October 2012 in select regions (north, central and south) on account of the end ofmonsoon season. The northern region saw a rise of Rs 20-23/bag, one of the highest among all regions, which took average October 2012prices to Rs 295/bag. In the south and central regions, prices recovered marginally by Rs 7-9/bag, which took average prices in the south and central region to Rs 302/bag and Rs 272/bag, respectively, for October 2012.
In the eastern region, prices remained flat as that of last month while the west region saw a decline of Rs 10-12/bag MoM to Rs 285/bag due to subdued demand. With this mixed pricing trend, all-India average cement prices stood at Rs 291/bag, a marginal recovery of Rs 6/bag MoM. On a YoY basis, prices are still higher by Rs 35/bag, driven by price hikes by manufacturers on account of an increase in freight and raw material costs. According to dealers, cement prices are expected to increase or remain firm in H2FY13 due to expectations of a pick-up in construction activities.
``We expect cement demand to grow at 6.7% YoY in FY13E and 8.9% in FY14E, driven by demand from rural and semi-urban housing. Though the capacity utilisation rate is expected to remain lower in FY13E at 76% due to higher effective capacity additions, we expect utilisation rates to improve gradually to 78% by FY14E as incremental demand is likely to surpass effective capacity additions during the year,`` saidICICIdirect.
``On the pricing front, we expect cement prices to see short-term pressure due to seasonal weakness. However, improvement in utilisation rates coupled with higher input costs would keep cementprices at higher levels over a long term. On the cost front, the overall cost is expected to remain high due to an increase in freight, power & raw material costs. However, overall industry margins are expected to see an improvement over FY13-14E on account of firming up realizations, rise in volumes and operating leverage benefits.``
``ACC and Shree cement posted 3.6% YoY and 6.9% YoY growth in dispatches, respectively. The muted YoY growth in dispatches was on account of the sluggish pace of construction activity during the year as compared to last year. During YTDFY13 (April-October 2012), aggregate dispatch of the company grew by 4.7% YoY. We expect the total industry’s volume growth at 6.7% YoY for FY13E, slightly lower than our previous estimate of 7% YoY.``
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