Cement dispatches rebound

Dispatches for the country's cement sector, were not much to write home about in the first month of FY16. Heavy rains across the country accompanied by floods in some areas dampened construction activity and capped cement sales. However, cement sales have rebounded in the outgoing month; to register an all-time high for August.
A review of cement dispatches over the past six years suggests that there is some shift in the seasonality of cement demand. Historically, July and August were both considered periods of relatively low demand while dispatches would begin to mount from September onwards. This trend was upended last year, when August dispatches towered over cement sales registered in July 2014.
The change in seasonality is attributable to rains and floods at the onset of the fiscal. Analysts also point to a lull in construction activity in the month of Ramadan. For these reasons, a comparison of monthly sales tally seems more meaningful when juxtaposed against dispatches in the same month of the previous fiscal.
Although cement dispatches are up by eight percent year-on-year; the increase is relatively muted as compared to the month-on-month increase of 33 percent, witnessed in August 2015. The trouble brewing for cement exports is blatantly obvious as well. Exports from the North region are down 30 percent, while exports from the South region are down 33 percent, in August 2015 compared to the same month of the previous fiscal.
For both regions, it is the domestic demand which has ensured that the industys cumulative sales remained on an upward trajectory. Within this increase, the lion's share was contributed by cement manufacturers in the South. Had it not been for 55 percent YoY increase in this regions domestic sales; total growth in dispatches over the same period would be less than half of the reported tally. In an earlier article entitled, "Cement sector: hype and happenings"; BR Research had highlighted that the sectors sales had shown no real boost in FY15, besides the initial surge. The sales tally reported for thus far in FY16 shows the new fiscal has commenced in a similar manner to the previous fiscal.
That article had pointed out that the stellar rise in cement stock prices is premised on hopes of heightened activity from Chinese investments and government's focus on infrastructure development. These hopes need to turn into reality soon, to keep cement sales on a brisk pace given that exports are drying up.