>CEMENT SECTOR: Regional Impact of delayed monsoons on cement prices

■ All India prices at Rs308/bag +2.3% mom. Supply shortage led by plant shutdowns & delayed monsoons helping demand; prices in north hiked +6% mom, central + 4% & western 3% mom. Price likely to soften with pick up of monsoon in August ¾ Subdued demand exerting downward pressure in eastern region-prices decline 3.6% mom. Electricity cuts drive AP upwards Rs20/bag hikes. Other southern regions remain flat 


■ Prices trend has surprised in June –July period despite some unusual decline seen during April-May period. Price recovery positive for producers


■ Cost pressure peaking out with international coal prices decline. Prefer ACC & Shree Cement. Retain HOLD on Ultratech (prefer Grasim). Maintain REDUCE on Ambuja & India Cement


Our recent channel checks suggest that plant shutdowns in Chattisgarh (4 cement plants-2 plants of UltraTech and 1 each of Ambuja Cement and Lafarge shut on alleged violation of air pollution control norms by Chattisgarh Environment Conservation Board) along with routine maintenance shutdowns (for some kilns) taken by cement producers in this period has resulted in a shortage of supply of cement. This together with delayed monsoon (which usually affect construction activities) is helping demand remain above expected seasonal levels, and has led to a temporary un-seasonal demand-supply mismatch; thereby fuelling cement prices hikes in Northern, central and western region. On the other hand owing to normal rainfall received in the eastern part of the country prices remain under pressure with a 3% mom decline. Price trend in Southern region remains flattish with the exception of Andhra Pradesh where electricity cuts drive prices up by Rs20-25/bag.


■ Industry Growth estimated at ~9-9.5%
The top 5 producers have posted a growth of 10.2% in the month of June. The industry growth normally trends at 80-90% of the top 5 producer’s dispatch growth trend (exception in the month of April-12) thereby pointing towards estimates of 9-9.5% yoy dispatch growth for industry in the month of June-12.



■ Regional Impact of delayed monsoons on cement prices
Northern Region: Rainfall in the northern region remains deficient with departure from long period average (LPA) of almost ~50-70%. The effect of this can be seen in pockets like Chandigarh and Punjab where prices have been hiked by 10.2% and 8.8% mom.


To read report in detail: CEMENT SECTOR
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