Cement

Cement demand still sluggish, prices fall


Fight for survival continues in the cement sector as sluggish demand and slow growth ail the sector. Only saving grace is strong demand in East India due to higher spending by state governments. July-September earnings, too, were not anything to be cheerful about.

Adding to the woes will be implementation of goods and service tax (GST) which is likely to become a reality in 2016. "Service tax paid on the transportation cost if is not made available at the dealers’ level, all become cost of the cement production. Unless and until the rates of GST on cement is kept at the level of not more than 12 percent, it is going to have adverse impact as far as the infrastructure industry is concerned.

Falling price :

In North India, cement prices have dipped to a four-month low as it fell in the range of Rs 40‐50 per bag in November and December due to intense competition and weak demand. Prices could further soften by Rs 5‐10 per bag in rest of the month due to year-end discounts and lean season for activity.

prices are expected to fall by Rs 12 per bag in Andhra Pradesh quarter-on-quarter due to low prices in October. Prices in Karnataka have fallen by Rs 8 per bag Q-o-Q due to surge of material from AP while, prices in Tamil Nadu and Kerala remained stable Q-o-Q in December.

Prices in Maharashtra have fallen by an average of Rs 16 per bag (Q-o-Q) due to intense competition from Southern players and weak demand. While, prices in Gujarat are up by Rs 5 per bag (Q-o-Q) on the back of better discipline.

It does not end here. Margins are likely to contract sequentially across the regions due to weak prices. This will however be partially offset by savings in energy costs.

 

Ultra tech Cement is good play on Cement.I hold it and is positive in long term.In near term there are head winds.But no significant capacities are being added and consolidation is under progress. This is long term positive with less players and less addition of fresh capacities.More over among commodities, this is pure Indian play with no threat of imports.Cement plants are taking lot of steps for energy conservation and savings.More over with consolidation,long transportation cost will go down as major players may cater market from nearest plants.Cement is indirect play on infrastructre and Real Estate which both are more sluggish and risky directly but every one optimistic for long tern