Amid a nationwide construction boom, cement makers in the country, the world’s second largest market, are bullish that they won’t see any major impact during the monsoon, the traditional slow period for the sector.
India produced 148 million tonnes (mt) of cement in 2006 and out of this 137mt were consumed domestically. The demand for cement has grown over 10% in the last two years.
“Cement prices used to fall by 5-7% during monsoons on account of a slowdown in production and low demand,” says A.K. Saraogi, president, corporate affairs, JK Cement Ltd, a North India-based mid-size cement player.
But cement prices in the past two years have held up well during the rainy season.
Most manufacturers also tend to schedule maintenance and other repair activities at their plants during this season.
Another trend that is helping the industry is a general boom in construction projects with many developers not having the luxury to completely stop work during the monsoons.
“We follow a strict deadline to complete our projects. So, even during the monsoon the construction activities continue,” said a senior executive of Kalpataru Builders, a Mumbai-based construction firm, who did not wished to be named.
“As a result, there will be hardly any difference in prices during the monsoon,” predicts Rupesh Sankhe, an analyst tracking cement sector for ICICI Direct. “Last year, the prices softened marginally in some parts of the country, but it remained flat in Mumbai, Delhi and Kolkata. It was kept artificially low in South India because of the state elections, but they shot up soon after the elections.”
Cement prices have recently gone down following a government move to impose an ad valorem duty of 12%, replacing the flat excise duty rate of Rs600 per tonne, in a move to curb inflation. That duty has reduced prices by Rs3-4 per bag in most parts of India where cement is sold below Rs250 for a 50kg bag.
Mumbai, India’s largest cement market, however, has not seen any change in the cement price as it is selling above a retail price of Rs250 a bag.
ACC lt is the largest domestic player with a capacity of 19.91mt as in December.