>Cement Sector (ANAGRAM)

Volumised Growth: All India cement production and dispatch witnessed healthy growth of 8.6% and 8.7% YOY, respectively. North and East regions witnessed strong volume growth, however overall volume growth was dragged down due to sluggish growth in West and Central. All India capacity utilization was 92% in Feb 09 against 95% in Feb 08. The capacity utilization rate recorded in Central region was highest at 97% and South recorded the lowest utilization rate of 88%.

Policy Updates: Providing relief from the impact slowdown, Government announced reduction in excise duty and service tax by 2%. The general excise duty on bulk cement has been reduced from 10 percent to 8 percent, the rate of service tax cut from 12 percent to 10 percent. Proposed excise duty of 8% ad valorem or a specific duty of Rs 230 per tonne, whichever is higher, benefits of which would be passed on to end users resulting in price reduction of Rs 3.50 - 4.50 / per bag.

Prices: Rising demand from the country's semi-urban regions and the housing sector is likely to keep cement prices firm for the next few months. The demand for the building materials, which saw a sudden spurt in November-December, has not been affected by the continuing economic slowdown

Coal Price Dips: Average coal prices for Feb were at USD 72/tonne. Prices decreased 6% compared to Jan. The Baltic Dry Index was up by 80% in Feb compared to Jan.

Outlook: The government is likely to go ahead with the promised infrastructure projects, which have got financial closure, as elections will be held soon. This would certainly push the demand. The industry is doing better than general expectations. The demand scenario is expected to remain buoyant till April-May, thereby keeping the prices firm. UltraTech, Grasim, India Cement and Madras Cement are likely to add capacities to the tune of 13 million tonnes in the next three months.

To see full report: CEMENT SECTOR