SC Order Stirs Up Industry Expectations
After a drift of 5.36 per cent in two months-August and September - the cement prices have bounced back by 2.74 per cent in September. Rising cost of inputs and consistent growth in demand for a few months have enabled the industry to bite the bullet - first by raising prices of special branded products followed by other categories.
"Cement production continues to do well with the low base effect helping growth. Also it is indicative of advance in infra spending on roads by the government and housing - especially affordable housing," said CARE Ratings in a recent report.
Several sectors, including cement, were showing signs of recovery in the economy till July 2018 mainly owing to the base effect of slowdown that has affected growth of these industries following demonetisation of 86 per cent of currency in the economy in November 2016. However the latest core sector growth figures for August 2018 have highlighted a slowdown in the growth of sectors like coal, crude oil and fertilisers in the core sector, while that of natural gas, refinery products, steel and electricity sustained their growth pace. Cement is the only core sector that has sustained its high growth path even in August 2018.
According to eight sectoral figures brought out in the Central Statistical Organisation (CSO), cement posted a growth of 14.7 per cent during April-August 2018 period, compared to 1.7 per cent growth during the same period of the previous year. During that period the overall index rose only by 5.5 per cent in 2018, compared to 3 per cent in the previous year. During April-August 2018, the growth of cement production oscillated between 21.9 per cent in April 2018 and 11.1 per cent in July 2018.
Though everything was going on smoothly, the Supreme Court of India, in an interim order issued on September 1, banned all construction activity till October 9 in Maharashtra, Madhya Pradesh, Uttarakhand and Chandigarh citing that they have failed to comply with its order to come up with a policy on solid waste management. Though it was realise in a few days that the decision was not to affect all kinds of construction activity in the states, it has stirred up the activity in residential construction sphere, creating confusion over demand for cement.
Following the SC order, the builders did not stop any work in progress and continued their activities without any hindrance, as they believed the ban applies only for new project approvals and upcoming constructions. That is, until a resolution comes in place, no fresh approvals will be given for any new construction site / projects. The builders in those states which were ready with solid waste management policy were in a safe bet.
Though things were sorted out very quickly, the cement industry and its stakeholders were keeping their fingers crossed for a few days. Only real monthly cement consumption figures will bring some clarity on the impact of the SC order on the industry and demand.
B.S. Srinivasalu Reddy