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Cement dealers' expectations of a recovery in demand seems to have been belied with most of them reporting high inventory in the previous fortnight despite offering special discounts on bulk purchases.
Major cement companies have reported a quantum jump in sales in July, reviving hopes of a recovery in demand. ACC sales were up 28 per cent at two million tonnes (mt) in July, while that of Ambuja Cements rose 14 per cent at 1.70 mt. UltraTech Cement dispatches jumped eight per cent to 3.1 mt.
“After depressing sales in June, we were hoping for an upturn with the monsoon close to coming to an end. Demand from real estate projects generally picks up along with festivities in August, but this time we are not so lucky,” said a Mumbai-based dealer.
The sharp increase in lending rates by most banks has hit buyers and real estate companies hard. The mark up of lending rates by State Bank of India and ICICI Bank on Thursday by 0.50 per cent will further add to pressure on new home buyers, said a cement company official.
Unable to pass on the raise in raw material cost to end consumers, cement companies have been cutting down production. All the raw materials have bit hit by rising prices, while cost pressure on coal alone accounts for about 30 per cent, he said.
PRICES FLAT
Cement prices have remained almost flat in the western and northern region. The shortage of brick supply has pushed up prices, slowing down construction activities in Gujarat. Demand from infrastructure projects is not showing any signs of picking up.
Cement prices in the southern States were mostly firm with Chennai reporting an increase of Rs 5 a bag, largely due to a mark up in value-added tax rates from 12.5 per cent to 14.5 per cent by the State Government.
After holding prices steady in July, prices dropped by Rs 10 a bag in Andhra Pradesh due to softening demand. Prices are expected to stabilise at current levels in Andhra as companies have already trimmed down supply, said a dealer.
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