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Indian cement makers may delay restart of plants

Cement companies in India, the world second biggest market, are wary about short-term prospects for demand and may not rush to restart plants if the federal government begins lifting its lockdown from 15 April.

Manufacturers are wary about likely cement demand trends, whether the lockdown is lifted nationally or only eased partially on a state-by-state basis. The uncertainty may keep most companies away from the seaborne petroleum coke market for a while.

The recent decision by Karnataka, a south Indian state, to allow cement plants to resume manufacturing has not motivated the industry to start operating again. The state has cement units run by leading companies including Ultratech, ACC and Dalmia Cement, among others.

The industry is reputed to be sitting on a large inventory of unsold cement spread between plants, dealers and traders. Companies maximised sales to dealers in March to meet revenue targets for the 2019-20 Indian financial year ending 31 March. But a nationwide 21-day lockdown from 25 March to control the spread of Covid-19 has led to a temporary collapse in demand. Companies also had to suspend all manufacturing activities immediately.

The industry is estimated to have enough stocks for at least one month under normal circumstance. But demand is likely to be well below normal now, which means the same stock may last for even two months. "Our priority will be to sell bulk of the stocks lying at the plants before restarting operations," said an executive at a leading cement maker.

April-June is usually marked by strong demand for cement in India as infrastructure companies and real estate developers try to speed up work before the arrival of the monsoon season slows demand. But this year cement makers worry that construction activity will figure at the bottom of the government's priority list as resources will be directed to social welfare schemes after the lockdown period.

The lockdown has affected cash flow in all sectors and various organisations have started delaying salary payments. There have been salary cuts and layoffs in various manufacturing and services sectors, undermining the purchasing power of the public. "Companies as well as individuals are very cautious about spending cash and the focus is purely on the essentials," said a market participant.

The sudden closure of manufacturing plants to comply with the lockdown meant that companies were also forced to declare force majeure and seek deferment of coke cargoes that were either on the seas or due for loading.

Indian demand for seaborne petroleum coke is expected to fall below 10mn t in 2020 as a result of this disruption, according to market participants who had projected a growth of nearly 30pc in shipments this year.

India imported 10.8mn t of coke in 2019, a 61pc year-on-year increase from a low base in 2018, according to GAC Shipping data.

By Ajay Modi

News No: 9068
Date: 2020/04/08 - 18:45
News Source: Argus Media

Indian  manufacturing  cement  stock  trader 


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