Proposed export ban may not hit cement industry

The move is unlikely to bring down domestic prices.

The domestic cement industry will have no significant impact of the government's likely move to ban cement exports, according to industry sources. They said that the move would instead add to their profitability.

HARD FACTS

Ban on cement exports to benefit cement companies

It will have marginal impact in domestic market

Domestic prices higher than global prices

Companies cutting exports on their own

There is still room for further rise in cement prices

Exports are already on the decline and the companies are voluntarily curbing overseas sales in order to meet the rising domestic demand. Sources in a top multi-national cement company said that the company had already cut its exports by half. 
 

Cement exports since 2002-03
Year	Quantity (in million tonnes)
A002-03	3.47
2003-04	3.36
2004-05	4.07
2005-06	6.01
2006-07	5.89
2007-08*	3.33
* Till Feb, 2008 Source : Cement Manufacturers' Association

Moreover, the difference in the realisations in the domestic market and the exports market is huge, which is itself discouraging exports.

According to cement analysts, the average domestic prices are hovering above Rs 3,200 a tonne whereas in the exports market it is around Rs 2,200 a tonne.

"Banning exports will not have any negative impact on the companies as they are getting better prices in the domestic market," said a Mumbai-based cement analyst, who did not wish to be named.

Ruling out the possibility of any price cut even if exports are banned, analysts said there was still room for further rise in prices, which would not be less than Rs 5 a bag of 50 kg.

Since cement exports are done mostly from western part of the country, the effect will not be felt across the country. The western region of the country consumes around 30 million tonnes of cement annually.

Sources in one of the leading infrastructure funding houses said, "Cement players are now in a better position and the ball is in their court."

Currently, majority of the cement plants are running at above 100 per cent capacity in order to meet the increasing domestic demand. The capacity expansion projects have already got delayed and the industry could add only 9 million tonnes capacity in FY08, which is half of what was projected.