Cement demand likely to remain robust in January

The domestic cement industry, which surprised the market with its high growth in despatches in December at a time when market was anticipating lack lusture demand, is likely to repeat the good show in January as well. Industry as well as the sector analysts said that so far demand has been good in the current month.

In December, the industry clocked a growth rate of 12.11 per cent (y-o-y) with a despatch figure of 16.01 million tonnes against 14.28 million tonnes. The growth rate till October was around 7-8 per cent. Industry statistics for January will be available from the Cement Manufacturers’ Association (CMA) by the first week of next month.

H M Bangur, president, CMA, said, “So far, the demand has been good this month. And I believe, more or less, the despatches growth rate will be equal to that of December’s.” Bangur is also the chairman and managing director of the north major Shree Cement - a dominant player in the region.

If the despatches growth rate is over 10 per cent in the current month, it will be after a gap of three years when industry would see growth above 10 per cent in despatches. It was in January, 2006 when industry had registered a rise of 14.34 per cent in despatches.

The factors which are fuelling good growth are mainly personal home building and infrastructure projects. According to Bangur, real estate is still showing weak demand for cement. Sumit Banerjee, managing director of the country’s largest cement giant ACC had told Business Standard that the domestic market was witnessing the growth factor in the later part of the December quarter. ACC, which felt forced to shut one of its kilns of 2.5 million tonne capacity in Himachal Pradesh due to weak demand, has its presence across the country.

Shailendra Chouksey, chief financial officer of J K Lakshmi Cement, said,” In December, our company had a despatch growth of 12 per cent and we expect it will be maintained in January as well since demand is expected to remain good.”

As on 31st December, the overall capacity of the domestic cement industry stood at 207 million tonnes. The production during April-December, 2008 was 101.78 million tonnes against 95.81 million tonnes during the same period in the previous year.

According to K C Birla, chief financial officer of the Aditya Birla group’s UltraTech Cement, “Demand so far from the South, East and North markets has been good this month. It is not a real estate-driven demand rather infrastructure and personal home building segment are the growth factors.”

After re-imposition of countervailing duty and special additional duty on imported cement from Pakistan, domestic cement industry - particularly in the northern market - got some relief. Moreover, the two stimulus packages announced by the government recently are being keenly watched by the cement makers with optimism. Analysts said that during the current scenario, cement industry has some more time to cheer before getting into the glut situation.