India's Cement sales surge in 2011 July rural demand rise

In India it was a 2011 July surprise for cement companies as they managed to register a growth in dispatches despite revival of monsoon in most parts of the country. The higher sales were mainly due to growing demand in the rural areas.

The revival in cement demand in July was impressive especially after the sharp fall in sales and production the preceding june month.

The  ACC's addition of new capacity of 3 MTPA (million tonnes per annum) in 2010 December boosted the company's sales and production.

JP Associates,  July sales at 14.5 lakh tonnes.  It is 18% Up

Bulk purchase by a few large dealers in the southern region also helped sales in July.

With revival in demand, cement companies preferred to align their production to demand in July to pass on incremental input cost.

The excess supply amid fall in demand in the last few months had made it difficult for cement companies to pass on the spike in raw material cost to end users. Cement production in the first quarter  (April -June) of this 2011-12 fiscal was down 1% at 42.36 million tonnes (42.94 million tonnes), while sales were marginally down at 42.16 million tonnes (42.43  million tonnes).

The earnings for the cement companies are likely to be under pressure in the medium term as the industry is witnessing surplus which is likely to put pressure on cement prices. Becasue of imported coal prices alone had gone up by about 30%, gypsum, limestone and fly ash prices have also gone up substantially. The rise in fuel prices has also pushed up cost of production for cement companies. The hike in lending rates by banks may depress the cement demand from the real estate sector with many big projects being delayed especially in major metropolitan cities.

                       

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