Cement pivotals rose on Monday, after Grasim reported a surge in its dispatches for Jan 2003 and L&T also registered a good volume growth for the month.

Grasim Industries was the star gainer in the cement sector on the back of a surge in its dispatches last month. The scrip was up 2.4% to Rs 332.70. L&T was up 1.4% to Rs 188.40, ACC was up 1.2% to Rs 144.70 and Gujarat Ambuja Cements was up 1.2% to Rs 159.80.

Cement scrips have witnessed a mixed trend in the last few weeks, with ACC and L&T remaining subdued and Grasim and GACL staging a recovery.

In January 2003, Grasim has posted a sharp 32% rise in its cement dispatches to 1.08 million tonnes. Its production rose by 28.7% to Rs 1.08 million tonnes for the month. On the other hand, L&T recorded a good 11.6% growth in dispatches to 960,000 tonnes. L&T's production fell by 1% to 940,000 tonnes.

Cement manufacturers have once again shifted their focus to improving dispatches. The first two quarters of the current financial year witnessed a sharp rise in dispatches at the cost of realisations. This, in turn, resulted in cement prices hitting their bottom in September 2002. Hence, the manufacturers turned their attention to prices from September 2002, but once again reverted back to drive up supplies in December 2002. Though much of the lost ground on the price front has been recovered since September 2002, the current prices are still lower on a year-on-year basis.

Cement production of large plants surged by 16.4% to 9.59 million tonnes in December 2002, while dispatches also reflected a healthy 13.9% rise to 9.51 million tonnes. The cumulative production and dispatches for the nine months ended December 2002 were higher by 9.7% and 9.3% to 81.58 million tonne and 81.36 million tonnes respectively.

The cement demand in recent months has been driven by national highway and roadway projects and the boom in the housing construction sector. The margins are further supported by reduced cost of production for blended cement, which has been progressively increasing its share in the total cement output.

Meanwhile, the 2.6 million tonne Sanghi Cements unit in Gujarat is likely to be commissioned soon. The capacity of the plant will be increased to 3.3 million tonne in six months time. The company is setting up two grinding units of 1.5 million tonne, each of which will become operational by this month and April 2003. This plant targets the markets in western and southern coastal regions, which is likely to put further pressure on cement prices, particularly in the western region.

Cement prices rose by 4% in a short span of five weeks, as reflected by the movement in wholesale price index from 141.6 in the week ended 5 October 2002 to 147.2 in the week ended 9 November 2002. However, the WPI slipped to 146.7 in the week ended 21 December 2002, still representing a 3.6% rise over the week ended October 2002. In the process, the WPI of cement in calendar 2002 has invariably been lower than the previous year, except in November 2002.