India: The India Ratings and Research has blamed demonetisation and elections for a poor fourth quarter for cement producers in the 2017 Indian financial year. Cement production volumes fell by 15.8% year-on-year in February 2017 and by 5% on a month-on-month basis. India Ratings also attributed the decline to a strong equivalent quarter in the 2016 financial year.
It reported that volumes for the major cement producers contracted by 5% year-on-year in the third quarter. On a regional basis it fell by 3% and 6% for producers in central and northern regions. However, volumes rose sharply, by 21%, in the south. Growth in the southern region has been supported by increases in government spending in the states of Andhra Pradesh and Telangana.
The agency also reported that changes announced by the Ministry of Railways, which requires long-term agreements and contracts for industries like cement, steel and fertilisers, could potentially drive demand for cement. The new policy will provide conditional discounts that could increase the transport of cement through the rail network and cement manufacturers will be able to control freight costs more effectively. However, the availability of wagons during peak periods might also constrain the policy.