Cement sales remained lacklustre in the first two months of this year, with no major recovery in demand from the infrastructure and realty sectors.
Shailendra Choksi, Director, JK Lakshmi Cement, said there was a minor recovery in sales during the first week of January, but that did not sustain and fell in February, due to dull demand from the infrastructure sector.
Cement companies are pinning their hopes on the sops offered in the Budget to the real estate and infrastructure sector to boost demand, he said. Increase in deductions for home loans up to Rs 25 lakh and interest subventions of one per cent are set to make home loans more attractive. Besides, allocation of Rs 2,000 crore for the urban housing fund to provide affordable low cost housing, it is also expected to boost cement demand in rural areas.
PRICE HIKE
Despite weak demand, cement companies have managed to hike prices in January and February. This was largely due to the increase in diesel prices and freight rates by the Railways. The all-India average price was up by three per cent to Rs 300 a 50-kg bag.
The eastern market, which includes Chhattisgarh, Bihar, Jharkhand, West Bengal, Assam, Meghalaya and Orissa, witnessed a price hike of Rs 30-70 a 50-kg bag in the last two months, while prices were up by Rs 30-60 a bag in Uttar Pradesh.
Municipal elections and excess supply in Gujarat led to cement prices falling by Rs 30 a bag in February, even as it remained firm in Maharashtra. The average price in the Western region was at Rs 310 a bag.
Mihir Jhaveri, Research Analayst, said cement prices may taper down due to seasonality, while volume growth would remain soft owing to the base effect.
Cement companies may have to cut down on their production to retain their pricing power. The fresh capacity added in the last three months may pull down capacity utilisation further from 75 per cent.
Last week, HeidelbergCement India said it had doubled production capacity to six million tonnes in Madhya Pradesh. In January, Bharati Cement, which is owned by France-based cement manufacturer Vicat Group, started dispatch from its new 2.75-million-tonne plant in Karnataka.
suresh.iyengar@thehindu.co.in