Cement firms' July growth lowest since 2001

Cement firms' July growth lowest since 2001 (updated - 17 Aug 2010)
Cement consumption continued to be affected by a combination of a higher base effect, poor investment demand and high rain in many parts of the country hurting despatches and construction activity. After hitting a 57-month low rate of growth in June, cement makers had little to rejoice in July, when despatch growth further slipped to 1.63 per cent. It was the lowest growth in July since 2001, when the industry registered negative growth of 6.55 per cent. The monsoon spread continues to take a toll. Lack of larger infrastructure projects over the past one-and-a-half quarters contributed to the lower offtake.

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The southern market continued to be the worst affected. Other regions are falling, too, but with relatively lesser decline in demand. Though manufacturers say the current financial year would see growth of 9-10 per cent, the statistics so far in the year are not encouraging. The June quarter growth, at 6.2 per cent, was the worst in the past nine quarters. Analysts and manufacturers say the current quarter (July-September) will be worse.

At 270 million tonnes (mt), the industry is operating at 12 per cent higher capacity than last year. Analysts say this is also responsible for lower growth in recent months. According to the latest figures, the industry despatched 16.21 mt cement against 15.95 mt in the same month last year. Though a marginal growth on a year-on-year basis, despatches fell 5.4 per cent on a month-on-month basis.

“Further spread of monsoon in July across the country has dampened the offtake. However, another important factor is the high-base effect, which is pushing the growth down, too,” said Jinal Joshi, research analyst at Jaypee Capital.

While the industry is blaming the monsoon as the primary reason for the poor offtake, this hadn’t hit demand in previous years. While despatches grew 5.1 per cent between April and July this year, they had not shown any remarkable decline in the past five years during rain and grew at 10 per cent or more. Even in August last year, despatches grew at 17.2 per cent.