2012 has been a tough year for the cement sector. Contrary to popular belief, the second half of the year did not see demand picking up, and profitability for cement companies took a beating, CNBC-TV18’s Archana Shukla reports that 2013 may bring some cheer.
Weak demand, charges of cartelisation, and prices which fell over 15 percent all of which took a toll on profitability. 2012 will be a year the cement sector will want to forget, but the industry hopes to recover some of its lost sheen in the new year.
It is betting on the cheer to start with January, when the busy construction season begins and there's already talk of a hike in cement prices.
A Religare Institutional Research report says prices have already inched up by Rs 15 per bag in Gujarat and this is likely to strengthen further by Rs 20-25, as government infrastructure projects pick up after the elections. However, Mumbai and Pune may still see muted demand.
East India, especially in Patna and Kolkata, saw a sharp drop in prices due to weak demand and labour shortage, but companies have announced a price hike in the Rs 10-20 per bag range starting January.
Towards the South, Karnataka has been seeing some price stability, but Andhra Pradesh continues to be volatile, a situation exacerbated by a sand shortage. Kerala, however, should go up by around Rs 10 per bag starting January.
However, the situation may remain grim for Central and Northern India. A severe winter, and a shortage of bricks and sand may keep construction activity from picking up and Jaipur remains a sole beacon of hope.
A Kotak Securities report says that only if a widening demand-supply gap is arrested will India's cement consumption rise 27 percent to 284.5 million tonne by 2015. Industry says that for this to happen faster, rate cuts to boost consumer spending are necessary.
But cement companies are also hoping that some relief from the January 29 hearing on the cement cartelisation issue at the competition commission could lend a much-needed helping hand.