Suresh P. Iyengar

Mumbai, Nov. 4 The first sign of cement demand slowdown was evident from the fall in production and dispatches for October announced by major cement companies.

Ambuja Cements, a Holcim Group company, registered a four per cent decline in production at 1.45 million tonnes in October against 1.51 mt in the same period last year. Dispatches were down 3.98 per cent to 1.42 mt (1.48 mt).

Another Holcim-owned company, ACC, reported a 1.13 per cent drop in production to 1.74 mt in October, against 1.76 mt reported in the same period last year. Dispatches dipped 3.40 per cent to 1.70 mt (1.76 mt).

Dispatches by Aditya Birla group companies - Grasim Industries and Ultratech Cement - grew marginally by 1.93 per cent to 2.54 mt in October while production rose 4.83 per cent to 2.61 mt.

Holcim Group and Birla Group companies command over 55 per cent market share through their presence across the country.

“The fall in dispatches may add to inventory, exerting pressure on already stressed working capital of the companies. If the downward revision of GDP growth estimates are of any indication, the worst is not over for them,” said an analyst.

Marked slowdown in realty and infrastructure projects has brought down demand for cement and depressed prices. Realty sector accounts for over 55 per cent of demand.

In fact, oversupply in the eastern region had forced companies to cut prices, said an analyst. The fall in imports from Pakistan pushed up demand in the northern region, resulting in a marginal increase in prices. But stiff competition among companies to hold on to their market share ensured prices remained more or less unchanged.

The drop in demand comes at a time when profit margins are suffering due to rising input cost. The depreciation of rupee has almost negated the recent drop in coal and freight charges.

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