The cement demand in May was lower by 30% in south India and 10% in east and northeast, on a y-o-y basis, Ujjwal Batria, chief operating officer at Dalmia Cement Bharat told Vikas Srivastava.
The cement demand in May was lower by 30% in south India and 10% in east and northeast, on a y-o-y basis, Ujjwal Batria, chief operating officer at Dalmia Cement Bharat told Vikas Srivastava. The situation is likely to remain the same in the month of June as well, he says. Cement prices too have started to fall due to over supplies and setting in of monsoon in June after a spike in May. The only silver lining visible now is the spurt in rural housing activity.
What has been the impact of lockdown on your business in the last week of March, and after the relaxations in May and June?
The last week of March and the whole of April were a complete washout as there were no activity due to lockdown. The business went down by 85-90% in April. However, from May onwards things started to look up as situation improved with more clarity on the ways to handle the plants, warehouses and the despatches.
The pent up demand from March and April has been available to us as people started completing their construction work before monsoon sets in. So, May and June have seen a reasonably satisfactory ramp-up for us. Our capacity utilisation improved to 70%-80% after dropping to 10%-15% in April.
We have a large presence in east and northeast, where the situation has been comparatively better. Also, the problem of migrant labour was not there in Bihar, Jharkhand, Chattishgarh and Bengal. However, our southern facilities were impacted due to movement of labour force to North due to lockdown, and decline in construction activities.
What has been the impact on pricing for the industry and Dalmia Cement?
The pricing is demand-supply equation dependent. Typically, the cement season for the industry is a period between January and July before the monsoon sets in. The prices did go up for us and the industry in the month of May, as demand picked up after the relaxations. But oversupplies and monsoon have started to put pressure on prices now again in June.
Which are the sectors and regions where you see demand picking up, especially as more and more regions are getting impacted due to the increase in number of Covid patients?
I would say demand in south has been severely affected. The demand has contracted by 30% (y-o-y) in May. However, in east and northeast the impact of demand contraction was lower at 5%-10% in the same period. The demand that we are seeing today is mostly in rural housing segment due to shifting of migrant labours back to their homes. They want to have a safety of single room house or a two room facility back home. Besides, there were lot of construction activities that were stopped due to lockdown have started to pick up before the monsoon. On the infrastructure, side we are waiting for the Rs 50,000 crore rural scheme announced by the government to pick up soon.
What has been the impact of supply chain issues on raw material supplies? Have the raw material supplies resumed from China?
We do import gypsum and petcoke, but the supplies were not badly affected as there were sufficient raw material pending from March and April stock. The impact was more on the packaging industry as they faced labour shortage due to migration from labour intensive factories. We do not have any imports from China.
Given the current scenario are you maintaining your capex plan for FY21?
We have a capex plan of Rs 1,200 crore for two grinding stations we are setting up in the east, but they have got delayed by 4-5 months due to the lockdown. Going ahead we will be cautious on capex as the situation is very fluid, but not at the cost of the projects. We may at best delay the projects by 4-5 months as they are half completed under construction projects that we will prefer to complete.