Concrete

Demonetisation and After | Positive Outlook

Published

8 years ago

January 31, 2017

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Vaibhav Agarwal visited north India to assess the impact of the government’s radical move on the region’s cement industry.

We visited cement manufacturers, channel partners, builders and contractors in north India for an update on the situation and outlook after the government’s demonetisation move.

The channel mechanism in north India is very different from the south; channel partners aren’t as happy, and this is a key reason for price volatility in this region. Even so, most partners sounded positive, especially on demand. A majority of them said that pricing is bound to improve in the region and that all players, including the large northern majors, appear to be in favour of better prices.

Prices should recover steadily in the north over Q4/Q1. The impact of demonetisation is now neutralised. Most of the respondents said that although demonetisation has had an impact, it was much lower than initially anticipated.

North India is a largely cash and carry economy. Most traders either adapted to the situation (accepting payments through bank transfers) or were accepting old currency even after 8 November 2016. In many cases, traders said that a lot of their outstandings were cleared in old currency; a few even recovered written off debts ‘ which kept the cycle up. Most channel partners/dealers we met complained of low net margins irrespective of cement prices. This is one of the key reasons why prices there remain more unstable despite high capacity utilisations.

Also the main reason why most price hikes in the north do not flow through as effectively as they do in the south, is because channel partners simply do not participate in companies’ price hike announcements (a key issue that has remained unaddressed for long).

This segment has also not taken to e wallets and swipe machines and it demands more stringent laws for cheque returns due to the weak channel margin structure in the north. Ergo, almost all partners said that they are not in favour of moving to digital payments.

A 1-2 per cent charge on digital transactions, they say, is a very high cost ‘ one that would take away most of their margins. Barring a few, most dealers didn’t have the mechanism for digital payments. It was said that the largest cement major rolled back the idea of installing swipe machines for channel partners. Trade associations here have approached the government to make laws more stringent for cheque returns, as issuing post dated cheques is the most common business practice there. A change in target customer segments has also helped a few manufacturers.

Smart shift
A few cement manufacturers have made a deliberate and smart shift in focus to accounts within their non-trade sales. These are a sub-segment of non-trade customers where the order flow is more regular, with no payment issues, and no extended credits. We understand that this deliberate shift has helped a few north-based manufacturers (such as JK Cement) to sail through demonetisation better. Construction of toilets and roads are some of the key demand drivers. Almost the entire channel expects prices to be up by a minimum (net) of Rs 25/bag over H1CY17.

We reiterate JK Cement as our top northern pick. Other companies like JK Lakshmi Cement, and Mangalam Cement are also attractive bets. Shree Cement will continue to command a premium due to its ability to perform well in all scenarios.

Concrete

Jefferies’ Optimism Fuels Cement Stock Rally

The industry is aiming price hikes of Rs 10-15 per bag in December.

Published

3 weeks ago

December 4, 2024

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Cement stocks surged over 5% on Monday, driven by Jefferies’ positive outlook on demand recovery, supported by increased government capital expenditure and favourable price trends.

JK Cement led the rally with a 5.3% jump, while UltraTech Cement rose 3.82%, making it the top performer on the Nifty 50. Dalmia Bharat and Grasim Industries gained over 3% each, with Shree Cement and Ambuja Cement adding 2.77% and 1.32%, respectively.

“Cement stocks have been consolidating without significant upward movement for over a year,” noted Vikas Jain, head of research at Reliance Securities. “The Jefferies report with positive price feedback prompted a revaluation of these stocks today.”

According to Jefferies, cement prices were stable in November, with earlier declines bottoming out. The industry is now targeting price hikes of Rs 10-15 per bag in December.

The brokerage highlighted moderate demand growth in October and November, with recovery expected to strengthen in the fourth quarter, supported by a revival in government infrastructure spending.
Analysts are optimistic about a stronger recovery in the latter half of FY25, driven by anticipated increases in government investments in infrastructure projects.
(ET)

Concrete

Steel Ministry Proposes 25% Safeguard Duty on Steel Imports

The duty aims to counter the impact of rising low-cost steel imports.

Published

3 weeks ago

December 4, 2024

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The Ministry of Steel has proposed a 25% safeguard duty on certain steel imports to address concerns raised by domestic producers. The proposal emerged during a meeting between Union Steel Minister H.D. Kumaraswamy and Commerce and Industry Minister Piyush Goyal in New Delhi, attended by senior officials and executives from leading steel companies like SAIL, Tata Steel, JSW Steel, and AMNS India.

Following the meeting, Goyal highlighted on X the importance of steel and metallurgical coke industries in India’s development, emphasising discussions on boosting production, improving quality, and enhancing global competitiveness. Kumaraswamy echoed the sentiment, pledging collaboration between ministries to create a business-friendly environment for domestic steelmakers.

The safeguard duty proposal aims to counter the impact of rising low-cost steel imports, particularly from free trade agreement (FTA) nations. Steel Secretary Sandeep Poundrik noted that 62% of steel imports currently enter at zero duty under FTAs, with imports rising to 5.51 million tonnes (MT) during April-September 2024-25, compared to 3.66 MT in the same period last year. Imports from China surged significantly, reaching 1.85 MT, up from 1.02 MT a year ago.

Industry experts, including think tank GTRI, have raised concerns about FTAs, highlighting cases where foreign producers partner with Indian firms to re-import steel at concessional rates. GTRI founder Ajay Srivastava also pointed to challenges like port delays and regulatory hurdles, which strain over 10,000 steel user units in India.

The government’s proposal reflects its commitment to supporting the domestic steel industry while addressing trade imbalances and promoting a self-reliant manufacturing sector.

(ET)

Concrete

India Imposes Anti-Dumping Duty on Solar Panel Aluminium Frames

Move boosts domestic aluminium industry, curbs low-cost imports

Published

3 weeks ago

December 4, 2024

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The Indian government has introduced anti-dumping duties on anodized aluminium frames for solar panels and modules imported from China, a move hailed by the Aluminium Association of India (AAI) as a significant step toward fostering a self-reliant aluminium sector.

The duties, effective for five years, aim to counter the influx of low-cost imports that have hindered domestic manufacturing. According to the Ministry of Finance, Chinese dumping has limited India’s ability to develop local production capabilities.

Ahead of Budget 2025, the aluminium industry has urged the government to introduce stronger trade protections. Key demands include raising import duties on primary and downstream aluminium products from 7.5% to 10% and imposing a uniform 7.5% duty on aluminium scrap to curb the influx of low-quality imports.

India’s heavy reliance on aluminium imports, which now account for 54% of the country’s demand, has resulted in an annual foreign exchange outflow of Rupees 562.91 billion. Scrap imports, doubling over the last decade, have surged to 1,825 KT in FY25, primarily sourced from China, the Middle East, the US, and the UK.

The AAI noted that while advanced economies like the US and China impose strict tariffs and restrictions to protect their aluminium industries, India has become the largest importer of aluminium scrap globally. This trend undermines local producers, who are urging robust measures to enhance the domestic aluminium ecosystem.

With India’s aluminium demand projected to reach 10 million tonnes by 2030, industry leaders emphasize the need for stronger policies to support local production and drive investments in capacity expansion. The anti-dumping duties on solar panel components, they say, are a vital first step in building a sustainable and competitive aluminium sector.