Cement prices likely to rule firm till June 2012
Cement prices are expected to rule firm till June 2012, in the wake of growing demand from the construction industry, said V Srinivasan, analyst of Angel Broking.
Cement prices should be on upswing till June 2012, due to demand from construction and infrastructure industry that has started picking up in north, central and western regions. However, there is little room for price hike in south as the prices are already at a peak level," said Srinivasan.
The prices are expected to increase to about Rs300-330 per 50 Kg bag over the next couple of months against Rs 280 per bag now and would hold on to that level till June 2012, he said.
The rise in prices would be due to increase in raw material costs like limestone and coal as manufacturers may be forced to pass on the cost to the consumer, he added.
Meanwhile, cement demand is expected to grow at a 6.5 per cent CAGR in FY 2012-13. The cement industry posted moderate 3.1 per cent year-on-year (year-on-year) growth in dispatches in the first half of FY 2012, following 4.5 per cent Y-o-Y increase in FY 2011. Modest growth in demand was largely attributed to a continued decline in demand in the southern region due to political instability in Andhra Pradesh and minimal pick-up in demand in Tamil Nadu and Kerala post the elections.
However, the western and northern regions posted good demand growth during first half of 2012. In November 2011, dispatches of players having a significant exposure in these regions grew strongly, the report said.
The analysis showed that the top-line growth of the cement majors remained impressive, but margins remained under pressure in second quarter of FY 2012. ACC, Ambuja, UltraTech, India Cements, Madras Cements and JK Lakshmi Cement posted average top-line growth of 24.1 per cent during second quarter of FY 2012, due to adoption of a strong production discipline particularly in south.
The report pointed out that the all-India capacity utilisation is likely to decline in FY 2012, but set to improve from FY 2013. The rate of capacity addition is set to moderate, with only 31 MTPA of capacity expected to be added in FY 2012-13, much lower than 55 mtpa added in FY 2010-11.
For FY 2013, Angel Broking expects the central region to report the highest capacity utilisation of 87 per cent, followed by the northern, eastern and western regions with capacity utilisation of 83 per cent, 80 per cent and 79 per cent, respectively.
“We expect the southern region to continue to be a laggard with capacity utilisation of 64 per cent due to minimal growth in demand and 13.5 mtpa of capacity expected to be added in FY 2012-13,” said Srinivasan.