Cement export falls by 40% in FY08 on rising local demand
Economic Times

Cement export from India has declined by as much as 40% in the April-January period this fiscal compared to last year due to rising domestic demand and consequent attractive realisation at home compared to export market.

India exported 3.13 million tonnes in the April-January period, as against 5.14 million tonnes in the same period last year. For the same period, the export as a percentage of total domestic cement production declined from 4% last year to 2.3% this year. India produced 136 million tonnes of cement in the given period, even as it added fresh capacity of 9 million tonnes per annum to take its installed capacity to 174 million tonnes per annum.

“Exports are down due to better domestic demand. Manufacturers want to increase supply in the domestic market to meet the increased demand,” says Grasim director DD Rathi. Grasim is a leading cement exporter. Mr Rathi says much of India’s export comprises of clinker, an intermediary product for cement. “Now cement makers are cutting the export of clinker and converting them into cement to supply to domestic market.”

An analyst with a domestic broking firm points out that the decline in cement export is also to do with newer capacities coming on stream in the Middle-East. New capacities in the Middle-East have made realisation for Indian cement makers a tad less attractive these days, he says. But Shree Cement managing director HM Bangur, who is also the president of Cement Manufacturers’ Association, disagrees.

“Irrespective of realisation, no manufacturer wants to forego his share in the domestic market,” he says. With robust demand keeping prices firm in the home market, manufacturers had little incentive to venture abroad.

WHY EVEN PASWAN ISN'T INTERVENING
Financial Express

FOR Ram Vilas Paswan--an energetic interventionist--to say he's keeping away from trying to talk steel prices down because his last attempt was critiqued severely, is not a small triumph for good economics. There's dear economic logic why steel prices have increased despite the excise duty reduction in the Budget. Prices have gone up because demand is outstripping supply, and supply side measures that were working earlier--increasing imports and holding down exports--are reaching their limits. The Indian steel industry is facing capacity constraints. Steel output growth scaled a three-year peak of 13% in 2006-07. But growth has slowed to around 6% in the first nine months of the current year. Slow growth in domestic production was offset to some extent by imports, which rose by more than a third in the first seven months of the current fiscal (the latest figure available). That is more than double the pace witnessed in the corresponding period of the previous year. Exports have gone down, too, adding to domestic availability: exports rose by 59% in April-October 2006, but fell by 13% in the current year. Falling exports and increasing imports helped soften steel prices to an extent; the increase in wholesale prices of steel slid from double-digit levels in early 2007 to just about 7% in early January 2008. This should have offered some relief. Of course, theoretically imports can be increased by further tariff cuts in the short run. But customs duty on alloys arid stainless steel was already reduced to 5% last year. Plus, international steel prices have surged with prices of some important products like cold rolled coil sheet and hot rolled coil sheet having going up by a quarter over the last two months. Rock bottom tariffs and high global steel prices make imports a less than credible supply side solution to the problem of escalating steel prices. And forcing down exports through strong-arm measures taken by the government is also not a solution. Investment sentiment in steel would be affected negatively if exports were to be actively discouraged by public policy instruments. So, what's the solution? Hope for a fall in global steel prices and/or wait for quick addition to domestic capacity. Rising steel prices are a market signal that such capacity addition will be a good investment.