Updated on
Summary Domestic demand of cement is expected to recover by 6% in FY12.
This is being expected in the wake of higher PSDP spending and more suitable weather conditions this year. Post the budgetary measures, retention for cement manufacturers has increased by an average 7% MoM in July so far to Rs5,300/ton. Though industry’s dispatches are likely to depict a MoM decline in July owing to the start of the monsoon season, industry reports suggest a slight improvement on a YoY basis. This jump is primarily due to the manufacturers not fully passing on the reduction in FED of Rs200/ton, removal of 2.5% SED and cut in GST of 1ppt. While domestic dispatches are anticipated to decline by 5-7%MoM (vs. a decline of 16%MoM last year) due to start of the monsoon season, industry reports suggest a slight improvement of 6-8% on a YoY basis. We expect this improvement on the back of purchases delayed until July 1st in anticipation of fall in prices, less inclement weather this year and some reconstruction activities in flood hit areas. Coal prices sliding down, allaying cost concerns After peaking at FOB US$130/ton in Jan 2011, coal prices have since then fallen to US$115/ton.
