Cement stocks: Steady under-performance
The market’s not too happy with cement stocks, for obvious reasons - slowing demand, increasing supply, government price controls, inability to export (given the shelf life), etc. Residential & commerical real estate growth is bust; infrastructure remains the key hope:
With rising cement supplies to north India, companies dependent on this market are changing their product mix from portland pozzolana cement (PPC) to ordinary portland cement (OPC) to sustain growth. OPC is used for roads and infrastructure while PPC is used in real estate projects.
Analysts said the data shows that the new trend is gathering momentum in the northern markets. OPC constituted 21.6% of total sales in the June quarter from 16% in the year-ago period. They said even after the rise in OPC production, there is still shortage of this product in the market.
The problem: the budget deficit’s growing rapidly thanks to the government handing out subsidies left & right, it’s only a matter of time before infrastructure projects become ‘cost cutting’ targets. And as for PPPs and such - have you seen infrastructure stocks lately?
Bottom line: Cement prices in India will fall. A lot. Soon.
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