Broking house, IL&FS Investmart has come outh with a latest report on cement monthly numbers for the month of July' 07. Accroding to the report the month of July is typically characterised by low cement consumption arising from the slow pace of construction activities during the monsoon season. July 2007 fell in line with this trend, with the industry posting a 1.7% MoM decline in consumption during the month. On YoY basis, however, cement consumption grew by an impressive 14.5%; this increase was supported by factors such as a strong 9% GDP growth, government’s focus on infrastructure development, irrigation projects undertaken by the government across the country, and the growing housing sector demand. A tight demand-supply scenario continued to keep cement prices firm during the month. With the overall industry capacity utilisation at 95%, we expect cement prices to remain firm until H2FY09, when cement capacity additions are likely to outpace demand. Thus, for next 12 months, the industry is expected to post strong revenue and profit growth.

Cement Prices and capacity utilization

We expect the cement demand to increase at a 10% CAGR for the next three years supported by

• Strong 8-9% GDP growth
• Government’s focus on infrastructure development 
• Irrigation projects undertaken by the government across the country 
• Growing housing sector demand.

Currently the industry is operating at 95% capacity utilisation levels. As per the announcements made by various companies, capacity additions during the next one year are expected to be limited. Moreover, these capacity additions too are getting delayed as the order books of domestic equipment manufacturers are already full. The current cement demand-supply scenario warrants an increase in cement prices until Q1FY09. We, however, believe that once fresh capacity additions become operational, cement prices may come under pressure subsequently. Region-wise, the correction in prices is likely to be more in north and south India, as most capacity additions in FY09 are expected in these regions.

	Capacity	7-Jul	7-Jun	M0M (%)	6-Jul	YoY (%)	YTD	YoY (%)
	tonnes	dispatches	dispatches		Dispatches		Dispatches
ACC	1659090	1,616,490	1,678,330	-3.7	1,423,170	13.6	6,815,060	10.80%
BirlaCorp	481670	440,640	433,570	1.6	405,750	8.6	1,733,420	2.40%
CenturyTextiles	525000	543,690	584,730	-7	561,680	-3.2	2,280,690	4.40%
Dalmia	291670	325,550	281,230	15.8	235,050	38.5	1,163,790	47.10%
Grasim	1176250	1,311,700	1,341,500	-2.2	1,162,820	12.8	5,379,520	9.80%
AmbujaCement	1358320	1,392,160	1,385,180	0.5	1,164,440	19.6	5,778,310	4.00%
IndiaCement	734160	814,050	743,410	9.5	756,420	7.6	3,103,700	4.80%
JaiprakashIndustries	549990	515,270	576,740	-10.7	514,500	0.1	2,192,820	2.70%
KesoramIndustries	379170	313,820	326,250	-3.8	243,480	28.9	1,392,790	23.10%
Lafarge	416660	392,110	425,320	-7.8	302,530	29.6	1,701,860	9.30%
MadrasCement	455830	468,600	471,170	-0.5	481,490	-2.7	1,850,500	8.40%
MysoreCements	174590	189,280	181,260	4.4	183,360	3.2	757,480	5.80%
OCL	150000	156,490	161,920	-3.4	154,300	1.4	676,120	0.90%
Prism	209170	202,360	196,190