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Cement Price _ Volume Update

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									Country: India                                                                                  Sector Update
                                      5 December 2008


Sector: Cement                              Cement Price & Volume Update
Jay Asher
jay.asher@jmfinancial.in
Tel: (91 22) 6630 3078
                                      Cement     prices  confirm   weakening
                                      outlook from user industries
                                      We indicated in our note titled “Weak demand putting pressure on
                                      cement prices” dated 6 November 2008 that cement companies
                                      have started dropping prices due to weak demand and increased
                                      supplies from new cement capacities. Our dealer checks across
                                      eight major cities confirm that user industries (real estate and
                                      construction) have slowed down significantly. Apart from
                                      slowdown our channel checks suggest that there seems to be
                                      deferment for implementation of new projects. We recently spoke
                                      to cement dealers to get a feel on the pricing trends in various
                                      regions:

                                          Manufacturers drop prices in the Northern region: In the Northern
                                          region, Delhi and Jaipur witnessed a price drop of Rs3/bag and Rs2/bag
                                          to Rs230/bag and Rs220/bag in the month of November 2008,
                                          respectively. Our dealer sources indicated that cement companies have
                                          cut prices by Rs3-5/bag for bulk purchases by real estate developers in
                                          Noida and Gurgaon. Further, Delhi and Jaipur markets have witnessed
                                          price drop of Rs2/bag w.e.f. 1 December 2008 to Rs2228/bag and
                                          Rs218/bag, respectively. As per our dealer sources, demand has been
                                          lower than expected due to slowdown in real estate sector. Cement
                                          demand in the Northern region grew at a muted rate of 0.92% YoY for
                                          the period April 2008 to October 2008.

                                          Kolkata (Eastern region) witnesses a steep price drop: Cement
                                          prices dropped by Rs8/bag in November 2008 to Rs232/bag. Our dealer
                                          sources indicated that drop in prices was due to the increased supplies
                                          from manufacturers. The cement demand in the Eastern region
                                          reported a healthy growth of 11.3% YoY for the period April 2008 to
                                          October 2008.

                                          Cement prices remain stable in Southern region: In the month of
                                          November 2008, cement prices in Southern cities of Bangalore, Chennai
                                          and Hyderabad have remained stable at Rs273/bag, Rs271/bag and
                                          Rs227/bag. Our Hyderabad based dealer indicated that cement
                                          manufacturers have cut prices by Rs2/bag w.e.f. 1 December 2008 to
                                          Rs225/bag. Our Chennai based dealer informed that demand is slow
                                          due to heavy monsoons. Moreover, due to monsoons import of cement
                                          at Chennai port has stopped. Cement demand in the Southern region
                                          grew at a healthy rate of 12.46% YoY for the period April 2008 to
                                          October 2008.

                                          Prices remain stable with positive bias in Western region:
                                          Cement prices in the month of November 2008 remained stable in
                                          Mumbai market at Rs258/bag. Our dealer source indicated import of
                                          cement has reduced to insignificant levels on Mumbai ports. In
                                          Ahmedabad market, average cement prices in the month of November
                                          2008 remained steady at Rs229/bag and cement manufacturers have
                                          effected a price hike of Rs2/bag to Rs231/bag. Cement demand in the
                                          Western region grew at the rate of 6.64% YoY for the period April 2008
                                          to October 2008.



                           JM Financial Institutional Securities Private Limited
                               Please see important disclosure at the end of the report.
Cement Price & Volume Update

                               Exhibit 1: Price trends in major cities for the month of Nov-2008
                                City                             Nov 08*        YoY % chg                MoM % chg           Apr-Nov 08        YoY% chg
                                Mumbai (W)                           258                     5.7                     0.0            256              6.7
                                Ahmedabad (W)                        229                  2.2                        0.0            226              0.9
                                Jaipur (N)                           220                  3.3                    (0.9)              221              5.7
                                Delhi (N)                            230                 (0.9)                   (1.3)              234              2.6
                                Kolkata (E)                          232                 (0.4)                   (3.3)              244              6.6
                                Chennai (S)                          271                 12.9                        0.0            262             11.0
                                Hyderabad (S)                        227                  2.7                        0.0            227              1.8
                                Bangalore (S)                        273                 14.7                        0.0            264             10.5
                               Source: JM Financial, *Average prices per bag for the period taken.


                                     Cement majors reported 8.1% YoY growth in cement volumes:
                                     Major cement manufacturers reported 8.1% YoY growth in despatches at
                                     5.75 mn tonnes. Cement demand has grown by 7.63% YoY for the period
                                     of April 2008 to October 2008.


                               Exhibit 2: Cement despatches in November 2008                                                        (mn tonnes)
                                Company                       Nov 08          YoY % chg              MoM % chg                Apr-Nov 08       YoY% chg
                                ACC                              1.73                  9.5                     1.8                  13.65            2.2
                                Ambuja Cements                   1.48                  8.8                     8.2                  11.29            2.5
                                Grasim+Ultra Tech*               2.54                  6.7                     0.2                  17.59            3.7
                                Total                            5.75                  8.1                     2.6                  42.53            2.9
                               Source: Company, JM Financial. *Excluding exports & clinker sales.



                               Exhibit 3: Region-wise cement demand break-up                                                        (mn tonnes)
                                Region wise demand breakup                           Apr-Oct 08                      Apr-Oct 07               % Chg YoY
                                North                                                     19.08                             18.90                   0.92
                                East                                                      15.34                             13.78                  11.30
                                South                                                     31.40                             27.92                  12.46
                                West                                                      18.88                             17.70                   6.64
                                Central                                                   14.01                             13.40                   4.55
                                Total Domestic consumption                                98.71                             91.71                   7.63
                               Source: CMA, JM Financial.



                               Exhibit 4: Monthly despatches YoY growth (%)
                                16                                            14.8

                                14

                                12              10.9
                                                                                       10.0                          10.1
                                                                                                                                             9.6
                                10                                                                 8.6                        8.9
                                          7.3                           7.6                              7.5
                                 8
                                                               5.5
                                 6                                                                                                                 4.6
                                                        4.0                                                                          4.1
                                 4

                                 2

                                 0
                                        Sep-07 Oct-07   No v- Dec-07 Jan-08 Feb-08 M ar-08 A pr-08       M ay-   Jun-08 Jul-08 A ug-08 Sep-08 Oct-08
                                                         07                                               08


                               Source: CMA, JM Financial.



  5 December 2008       JM Financial Institutional Securities Private Limited                                                             Page 2
Cement Price & Volume Update




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   5 December 2008                                    JM Financial Institutional Securities Private Limited                                                                    Page 3

								
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