Floods: blessing in disguise for cement makers

The two-month monsoon episode that has roiled the country has also hit the manufacturing sector hard. A good case in point is the cement industry, which saw its demand cool by around 19 percent in August.
Supply disruptions, on account of damaged roads and rail links, along with a tepid pace of construction activities across the country pushed total dispatches down to around 2.38 million tons from 2.94 million in August last year.
Local dispatches experienced a major fall, down by 25 percent to 1.48 million tons, according to an APCMA official. Export dispatches, however, remained relatively stable, reaching 0.89 million tons from 0.94 million tons last August, as major cement exporters are located near the sea port that luckily escaped the wrath of floods.
Though, floodwater and rains have finally begun to wind down in major parts of the country, cement sales are expected to stay depressed during September, as roads are not operational in some parts of the country. It will probably take at least a week or more to restore, hoped industry participant. Moreover, the pace of construction activity will continue to decline in Ramazan, and for a week after the official Eid holidays.
However, once the country treks to normal routine, manufacturers located in northern areas would be the ones coining money from the post-flood cement demand during the later half of the current fiscal year and in the years ahead due to their proximity to much of the submerged areas. The industry expects local cement demand to grow by 10-15 percent in FY11.
Moreover, owing to depressed cement prices in the international market, which fell to an average $50 per ton in FY10 from $60 per ton in FY09, catering to domestic demand may become the favourite sport for cement manufacturers located in the landlocked provinces.
In keeping with the local need for cement and to pacify prices in the local market, it is likely that the government will fend off the inland freight subsidy incentive on exports of cement. Besides, since the government is light on cash, the cement sector stands little chance of winning the subsidy incentives.