Cement price average for the month of September was volatile, primarily with southernprices increasing at the start of the month by up to Rs. 40 per 50-kg. bag (~15%) as aresult of improvement in discipline and declining by a largely similar amount by the endof the month due to weak demand. Prices in other regions were mostly stable.
Due to demand was sluggish across regions for September, based on market whispers,estimated a year-on-year decline of ~2% for September; for H1FY20, 1- 2% y-o-ydecline for the industry. All-India average price for end-September was up 2% y-o-yand flat m-o-m; current prices are largely in line with expectations. Cement demand hasturned out to be lower than our conservative estimate for H1FY20.
Pricing volatility expected to return in the Northern region in the next few months, astwo major capacities have commenced operations in the last 3-4 months; the totaladdition by these two new clinker capacities are close to 6mtpa, which is ~10% of theregion’s capacity and, if demand is not growing at close to 10% at the time ofstabilisation of these capacities, fight for market share is likely to re-emerge. End of theSeptember prices range was Rs. 260-350 per 50-kg bag in New Delhi, Rs. 250-315 inJaipur, and Rs. 290-340 in Ludhiana.
According to ports’ Apex Body IPA, the country’s top-12 major ports have recorded amarginal 1.48% upswing in cargo handling at 348.44 million tonnes in the April-September period of the current financial year. The growth at these ports, which hadhandled 343.37 million tonnes cargo in the corresponding period of the previousfinancial year, was driven mainly by higher handling of coking coal, fertilisers and ironore.
According to the figures, Deendayal port handled the highest traffic volume at 61.04million tonnes during the April-September period, followed by Paradip at 55.55 milliontonnes, Visakhapatnam at 34.75, JNPT at 34.41, Kolkata (including Haldia) at 31.64,and Mumbai at 30.10 million tonnes. Chennai port handled 24.74 million tonnes ofcargo, while New Mangalore handled 17.86 million tonnes. The major ports handleabout 60% of the country’s total cargo traffic.
JSW Steel may consider setting up special purpose vehicles (SPVs) for expansion to take advantage of the government’s corporation tax incentive. The company would consider this alternative model for any future expansion beyond 13 million tonnes at Vijayanagar and 1 million tonnes each at Salem and 10 million tonnes at Dolvi, said JSW Steel’s Joint MD. As and when we take up these projects, we will explore setting up separate SPVs because of the great incentive which is available in the form of a sharper reduction in corporate tax rate where the effective rate is 17%, he said.
With NMDC set to restart mining at Donimalai in Bellari district of Karnataka, iron oresupply is bound to increase and bring down prices particularly when many sponge ironand pellet manufacturers in the State have shut operations due to rise in cost and weakdemand. The largest steel producer in the State JSW Steel will be the major beneficiaryas it was sourcing iron ore from another State in order to bridge the supply shortfall.
Seshagiri Rao, Joint Managing Director, JSW Steel, reported media, the recentamendment to the Mining Act will pave way for NMDC to restart production atDonimalai leading to a drop in price by ₹600 a tonne. The current steel demand is weakbut is expected to pick up with the government announcing various measures andseasonally the second half of the fiscal is always much better than the first due to several festivals.
Due to policy uncertainty and tariff glitches, the country’s installed capacity inrenewable energy (RE) could increase by just 40 GW to 104 GW by fiscal 2022 from64.4 GW in fiscal 2019, ending about 42% short of Government’s target of 175 GW.
According to Crisil Research, the sector has witnessed a material waning of developerinterest last fiscal. A sizeable (26%) of 64 GW of projects that were auctioned by theCentre and states received no or lukewarm bids and another 31% faced delays inallocation after being tendered.
The RE sector requires investments of ₹2.6 lakh crore over the next five years as perCRISIL Research’s outlook. The resolution of the above-mentioned policy risks wouldprovide a fillip to the sector, posing an upside to the current estimate of 104 GWinstalled capacity by fiscal 2022.