>CEMENT UPDATE (ANAGRAM)

ACCELERATING VOLUME GROWTH CONTINUES

The Indian cement industry posted a staggering growth for the seventh consecuare tive month during May 2009 as the dispatches found rising on the increased infrastructure and rural housing activity across the nation. All India cement production witnessed healthy growth of 11.9% YoY and dispatches of 10.8% YoY. All regions witnessed healthy growth, however northern region among them witnessed highest growth rate 26.3% YoY on back of the increased infrastructure spending and demand from the construction for the commonwealth games. Southern region witnessed sluggish growth rate of 4.1% YoY due to acute power cut problem and low demand in the region. Central, Western and Eastern regions dispatch growth of 11.0%, 8.3% and 7.2% respectively.

PRICES
The all India cement prices had crossed Rs. 250 per bag in May. The strong grip witnessed in cement prices is mainly on account of strong dispatch numbers posted by cement companies and continual delay in commencement of new capacities

SOFTENING OF IMPORTED COAL PRICES
Average coal prices have now come down from their July'08 peak of $200 and expected to remain around $68. Given the significant correction in international coal prices and pet coke prices, major beneficiaries will be those manufacturers who primarily rely on imported coal as a raw material in production process.

OUTLOOK
Demand in Apr-May had picked up mainly due to Government infrastructure projects and will come down by end of june-09 with the onset of monsoons. Cement prices could fall by up to 10% in the coming months, pushed lower by new supply and slower construction activity during monsoon season. However, with a likelihood of a fresh impetus to infrastructure and housing sector in the forthcoming budget, utilization levels may improve.

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