Cement sales falter in May due to weak demand

Suresh P. Iyengar Mumbai | Updated on March 12, 2018


Slowdown in infra projects in 5 States due to polls added to sluggishness

Cement sales continued its downtrend in May with most of the leading cement manufacturers including ACC, Ambuja Cement and UltraTech Cement, which have pan India presence, reporting a sharp decline as demand from the infrastructure and real estate sector faltered.

However, ACC registered a 14 per cent increase in sales largely due to lower base in the comparative period last year. Its production jumped 10 per cent.

ACC, which was lagging behind others in capacity addition, had commissioned a capacity of 12,500 tonnes per day at Wadi in Andhra Pradesh and 7,500 tonnes per day at Chanda in Maharashtra during the last one year.

“There was not much improvement in sales even after cement companies partially rolled back the price hike implemented in April,” said an analyst.

The slowdown in implementation of infrastructure projects especially in five States, which went for Assembly elections, further contributed to the sluggish demand, he added.

The weakness in sales just before the onset of monsoon does not bode well for cement companies as they were expecting the demand to pick up with real estate and infrastructure companies rushing to complete their projects.

“Besides, elections in five States, an acute shortage of labour across regions impacted construction activities leading to lower cement demand. Price hikes announced in May were not absorbed by the market,” said Mr Ajit Motwani, Research Analyst, Emkay Global Financial Services.

Prices dip

Cement prices in May decreased in most regions by Rs 8-10 for a 50 kg bag. The price correction was largely on account of an increase in the supply from new capacity and an increase in inter-regional movement by the cement companies.

“The sharpest fall in prices was witnessed in Kolkata as offtake by the infrastructure projects were hit by the Assembly election. Dealers expect further drop in prices with the onset of monsoon in June,” said an analyst.

Cement prices in Maharashtra remained unchanged at Rs 290 a bag on a month-on-month basis. Despite sustained demand, cement companies were not able to increase prices in the State due to new capacity addition in the region. However, with the monsoon setting in there may be a slowdown in demand, said a dealer.

On the BSE, shares of Ambuja Cements and UltraTech Cement were down 0.11 per cent and 2 per cent at Rs 142 and Rs 1,011. ACC gained 2 per cent to Rs 1,041.

Published on June 06, 2011

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