The demand outlook for FY15 remains relatively more favourable given the new government's focus on revival of infrastructure and investment spending. The growth in FY15 will also be supported by a low base as cement production grew by merely 3% in FY14. During Apr-May 2014, cement production has grown by 7.7% YoY as against 3.9% in the corresponding period last year.
Sabyasachi Majumdar, Senior Vice-President, ICRA Limited , says "s everal initiatives have been announced in Union Budget to promote infrastructure and housing investment. Increased provision under Rural Housing Fund and interest deduction on housing loans will boost urban and rural housing demand and in turn demand for cement. Further, government measures to promote investment in ports, roads, airports and other infrastructure projects are also likely to support cement demand. Cement companies are also likely to also benefit from the increase in long term funding availability for infrastructure projects which is likely to facilitate more investment in these sectors. Pick-up of real estate & industrial activity, infrastructure projects and overall investment cycle will remain critical for the sector over the near-term.
Cement prices in North India had seen a significant hike of Rs. 50/ bag during Q4 FY14 driven by temporary supply side disruptions following closure two cement plants of Binani Cement Limited with a total capacity of 6 MTPA in Rajasthan. The prices in certain parts of West India, particularly Gujarat were also impacted by the aforementioned shutdown. However, cement prices in these regions came under pressure in Apr-May 2014 following resumption of cement supply from Binani. Wholesale prices declined by Rs. 15-30/bag in Delhi, Ahmedabad and Chandigarh between Apr-Jun 2014. Prices in Mumbai market continued to remain under pressure and declined by Rs. 20/bag during Jan-May 2014 due to transfer of cement from Southern markets. However, with rise in prices in South in Jun 2014, wholesale prices in Mumbai also increased by Rs. 5-10/bag in Jun 2014. Cement prices in Eastern markets increased by Rs. 20-25/ bag during Jan-June 2014 as cement companies raised prices in the busy season to recover the rising costs. During Apr-June 2014 the average price in Delhi is higher by 10% in Delhi, 22% in Ahmedabad, 7% in Chandigarh as compared to prices in the corresponding period last year. Prices in Mumbai are flat while those in South and certain parts of East India are lower on YoY basis.
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