A prolonged subdued demand for cement in South India is prompting regional manufacturers to migrate to the western states of Maharashtra and Gujarat .jpg) It seems that a massive demand-supply mismatch is creating big-time troubles for domestic cement manufacturers, primarily the southern players. To make matters worse, an active South West monsoon further lowered the demand for the raw material as construction works came to a halt.On the production front, August proved to be a bad month for small manufacturers as well as for big companies. Note the following two instances:
Speaking to a TJCD correspondent, Satish Goyal, proprietor of Goyal Agencies, a Bengaluru-based mid-sized cement dealer of ACC, Bharathi Cement, Zuari and others said, “August was the worst month in recent times due to low sales. Dip in construction work resulted in poor demand and hence declining despatches. Cement prices also plummeted to around Rs 15-20 per bag in the region.”
In Andhra Pradesh, cement prices dipped by Rs 60-70 per bag to Rs 115-185 for a 50 kg bag.
However, things seem to be a little better for the northern players on the back of steady demand as construction works for Commonwealth Games are going in full swing. Jaiprakash Associates, which mainly operates in the northern part of the country, registered a rise in despatches in August.
Despite steady demand, cement prices are down by Rs 20 per bag in North India, confirmed Anil Gupta, a New Delhi-based cement dealer of Ambuja Cement, Ultratech and Jaypee Cement.
Southern players migrating
A prolonged subdued demand for cement in South India is prompting regional manufacturers to migrate to the western states of Maharashtra and Gujarat, although the market is slow due to monsoon in these regions.
According to Angel Broking, the Indian cement industry is likely to witness a tough 2010-11 primarily on account of oversupply. The industry recorded only 4% growth in the first four months of the current financial year as opposed to 11% growth during the same period in 2009-10.
“On the brighter side, a good monsoon is expected to generate better income for farmers, thereby triggering housing and construction activities and consequently increasing the demand for cement in rural areas,” opines optimistic Venugopal Maiyappan, a Chennai-based sectoral analyst. Mr Maiyappan further adds that as infrastructure development picks up speed over the coming months, demand for the raw material will naturally shoot up.
Furthermore, prices of coal, a key raw material for cement, have dropped and are likely to witness 7% fall to Rs 9,625.50 per tonne in the December quarter of 2010-11.
Jeeta Bandopadhyay |
