Cement Sector Grows 14% In April-August

The momentum is likely to be sustained for the full year as infrastructural problems have hit commissioning of new capacities. Prices, too, have moved up this year with northern and southern region showing the largest rise.

Overcapacity, says the report, which was expected to hit the industry in 1996-97, will not happen till 1998-99. Author of the report and analyst, Manish Jain projects that surplus will be a problem only if the cement industry continues to grow at its historical rate of eight per cent. If growth rises beyond eight per cent to either 10 or 12 per cent, deficits will occur.

For example, in 1996-97, a 10 per cent demand growth will see a deficit of one million tonnes, while a 12 per cent growth will push up deficit to two million tonnes. A lower growth of eight per cent will surplus of three million tonnes in 1997-98 to rise to seven million tonnes in 1998-99.

Jain has recommended a hold on India Cements and a sell on Associated Cement Companies (ACC).

Demand growth has been the highest in northern and southern regions. From nine per cent in 1995-96, demand in north has risen to 17 per cent in April-August 1996-97. Uttar Pradesh has grown by 18 per cent and Punjab by 27 per cent.

In south, demand has risen to 15 per cent in 1996-97 from 10 per cent in 1995-96. Karnataka with 11 per cent, Kerala with seven per cent and Tamil Nadu with 15 per cent led the growth.

Prices in both these regions have been moving up. In north, prices have moved up from Rs 126 per bag average in April 1995 to Rs 146 per bag in April 1996. Ditto in south. As compared to average price of Rs 137 per bag in April 1995, prices have moved to Rs 155 per bag.