Home > Cement, Infrastructure, Six Core Infra > Cement despatches surge in May.. How about times ahead?

Cement despatches surge in May.. How about times ahead?

Cement despatches have been rising in India for the past few years. In May 2010, most companies (which declared their despatch numbers) recorded double-digit growth compared to the year-ago level. Most parts of India observed a healthy growth in offtake, media reports say. This growth was driven by improved demand from the infrastructure and real estate segments.

Cement Despatches (in lakh tonnes)
  May 2010 y-o-y growth Apr-May 2010 y-o-y growth
Aditya Birla Group 33.5 5.6% 67.3 5.9%
Ambuja Cement 18.6 14.1% n.a. n.a.
Shree Cement 8.5 15.1% 16.0 4.9%
JK Lakshmi Cement 3.6 14.0% n.a. n.a.
Jaiprakash Associates 13.3 63.0% 25.73 60%
Source: Companies


Despatches rose in spite of an increase in cement prices. A look at the prices indicate an upward trend from February onwards. High prices of coal, petrol, introduction of service tax on rail freight and the excise duty hike in the budget prompted cement producers to pass on the burden to end users. And since demand was robust, cement manufacturers were able to pass on the incremental cost to buyers.

However, downward pressure on cement prices has begun to build up and the rising price trend does not seem sustainable. This is because of two reasons. One, because beginning of the monsoon also marks the start of cyclical downturn in the industry as construction activity slows down. Two, the industry recorded a sharp 22% rise in capacity addition during FY10, which will start production in full swing in 2010.

Also, another 50 million tonnes of cement capacity is expected to be added in 2010-11, according to CRISIL research. This is expected to result in a fall in cement prices by 2-3% during 2010-11. After which, expansion is likely to slowdown and demand will continue to be robust.

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