Industries, including cement and steel manufacturing, were allowed to start operations from Monday. Many of these have either partially started operations or are in the process of seeking local level approvals. As mandis, trucks, labour, warehouses and dealerships go missing from the value chain, cement and
are uncertain of a market for the resumed production.
“For retail demand to pick up, it is important that the loha mandis (metal markets) in every city are open. Currently, there is no clearance for these mandis,” said V R Sharma, managing director at Jindal Steel & Power. The same holds true for the cement sector, with cement dealers yet to be allowed to open their shops.
Sharma added, as mandis are shut traders, who stock their material at the mandis cannot give it to the dealers or distributors.
He is hopeful the steel ministry will soon release a notification addressing these concerns. Another executive from one of India’s top cement producers added, companies
have been unable to move out stock from plants as warehouses are shut.
have outsourced thier warehouse facility to a third-party.
are unable to move material, dealers continue to suffer due to absence of any business. Sanjay Ladiwala, executive member with Cement Stockists & Dealers Association, points out that the government on Monday allowed dealers to take and process online orders. He added, however, that the online process is fraught with various issues.
Even though demand is largely absent, cement prices
for certain pockets have seen a rise. Cement in the Telangana market, for instance, increased from Rs 325 a bag effective April to Rs 370 per bag effective May in the non-trade segment. Industry executives have also pointed out it will not be viable to reduce cement prices
levels as running factories at lower utilisation will also impact viability.
Nitin Bhasin, head of research-institutional equities at Ambit Capital, does not expect cement companies
to run kilns for the first two weeks post lifting of the nationwide lockdown.
"April and May, both would be very weak months for cement demand. As the lockdown
opens up, for the first two weeks, they don't need to run the kilns as they will have cement in the silos and the already produced clinker, to meet the early days of demand,” he said. Inventories at the factory level are piling up. Ravinder Reddy, director- marketing for Bharathi Cements, pegs the inventory level from 7 to 15 days varying from plant to plant and cement has a shelf life of three months.
A senior official from Steel Authority of India (SAIL) points out that April is the month when dealers get demand registrations. “This fiscal we all are still waiting,” he said. The officials pointed out some of the large distributors are also facing concerns over non-movement of products from factories. The wait in the case of the cement sector may be longer as 40 per cent of India's cement demand comes from individual housing projects, which are currently under lockdown. Industry executives also point out that large infrastructure projects, from where cement demand could come in, are city-centred, with most of them in red zones.
Some others are focusing on readying their plants to be able to supply once demand kicks in. “We are currently preparing to be in a position to supply. Our Infrastructure clients have asked us to keep stock ready so once labour and other concerns are addressed, supply can be made,” said Shailendra Choksey, whole-time director of J K Lakshmi Cement, last week. Choksey does not expect the cement sector to return to its optimal level of utilization before the third quarter of the current financial year.
“At the moment most of the cement companies
will be having inventories with them, first as demand comes up from infrastructure and dealers they will start dispersing the cement and thereafter they will start real production of clinker and cement,” said Mahendra Singhi, president for Cement Manufacturers Association (CMA).