A sharp slowdown in offtake from the infrastructure segment, extended monsoon, labour shortage (due to festive season), and huge stock positions at the dealer and consumer level have resulted in a poor set of despatch numbers for the Indian cement industry.
Cement majors have reported a sharp slowdown in growth in November compared to the previous month. While Ambuja Cements reported a decline in despatches due to poor demand and a transporters? strike in the Himachal plant, Jaiprakash Associates reported the slowest growth in the current fiscal due to poor demand. Aditya Birla Group?s UltraTech Cement also posted a 9.25% year on year (yoy) fall in despatches growth, citing reasons of lack of construction during festive season, whereas ACC reported a y-o-y growth, as new capacities commenced recently.
J Radhakrishnan, an analyst with IIFL, said, ?Our dealer feedback indicates intense price competition from ACC, Dalmia Cements and Chettinad Cements in the southern region. Based on the reported numbers and our feedback from dealers, we estimate a 2-5% y-o-y decline in industry despatches in November.?
Meanwhile, after a series of price hikes since September onwards, cement prices pan India have started to decline. Cement prices have dropped by Rs 10-15 per 50 kg bag across the nation. A price dip of Rs 5 per bag is expected in Mumbai, where the prices were stable so far, whereas in the Vidharbh region in Maharashtra, prices have already corrected by Rs 5-10 per bag, say cement delears.
?On account of increased supply from the Southern region, prices in Mumbai are expected to drop,? said a Mumbai based stockist.
According to Mihir Jhaveri, an analyst with Religare Institutional Research, ?In view of a Rs 80-100 per bag hike in the south, the drop in prices appears marginal. We also expect prices to see some upward movement in the fourth quarter of FY2011 as volumes generally pick up during the last quarter, Jhaveri said in his report.
Cement prices in the western regioniare currently in the range of Rs 230-240 per bag whereas in South its Rs 220-240 per bag.
Experts have maintained a negative outlook on the sector, as growth in demand is expected to fall short of growth in supply.
?We do not expect a meaningful improvement in industry fundamentals in FY12 either, given the likely increase in competition for market share after several new competitors? capacities across regions have stabilised,? said Radhakrishnan.in his report.
