Grasim Industries has recorded volume growth of 10% YoY (15% MoM) while Ambuja recorded growth of 12% YoY (+14% MoM) in March 2010. ACC’s volume declined by -3% YoY (+13% MoM). YTD (Apr-Feb), the industry despatch has grown by 11%. Industry dispatch data for Mar has yet to be released.
Cement prices have increased by ~40% since Dec 09 in South and around 5-15%. Prices in most regions now are above the 2009 pre-monsoon levels. We expect Apr-Jun quarter prices to remain firm due to increase in demand from expedition of infrastructure projects (like roads, irrigation and hydro projects) before the monsoon season.
The overcapacity scenario should peak out in FY11E as the current leg of capacity expansion gets completed in the next ~12 months. Pricing discipline is likely to be maintained due to the highly concentrated nature of the industry regionally (except in South where top 5 producers account for ~50% capacity). Price fall is seasonal/regional in nature with monsoon season being the weakest quarter. We believe the sector could temporarily underperform in the coming monsoon season though we remain positive from a 12 month and medium term perspective.