Following the relaxation offered by the Centre to continuous process industries, cement companies are in the process of resuming operations across the country, although it is primarily limited to dispatch and sales with minimal production activity.
Sector leader UltraTech Cement, as well as other companies like Dalmia Bharat Cement, Heidelberg Cement India and others, said that partial operations at some of the companies' plants have resumed.
The second largest cement company, Shree Cement and others in the league like Ambuja Cements, JSW Cement, JK Cement and others are in the process of obtaining permissions from various state governments to open the plants.
JK Cement, in a notification to the BSE, said that it is seeking necessary permissions and approvals from appropriate government authorities for the resumption of production at facilities located in Rajasthan, Haryana and Madhya Pradesh.
Sources said that while UltraTech has resumed operations, it is primarily on the sales front. It has also started the kilns to resume production. Limited manufacturing activities are underway in nearly all the cement companies which have resumed production. Usually it takes 2-4 days for companies to resume production after starting the kilns.
“We have resumed operations but it is limited to dispatches directly to the consumers. We will take a call on manufacturing after sometime," Mahendra Singhi, CEO at Dalmia Bharat Cement, said.
JK Lakshmi Cement has also resumed operations at its integrated plants at Jaykaypuram in Rajasthan and Durg in Chhattisgarh, but operations are also limited to dispatches.
According to Heidelberg, it will gradually step up its operations depending upon the directions being issued by the government from time to time and the market demand.
Sandip Ghose, chief operating officer, Birla Corporation, said that the decision to ramp up plant operations and resume production depends on the market demand, which is expected to be sluggish, and how the coronavirus (Covid-19) pandemic situation unfolds in the country.
“There is no notification yet which allows dealers to operate and open their stores. So, initially only large construction sites will start - but that is subject to availability of labour and other construction materials like sand, aggregates etc. Starting production is less of an issue - demand will be the main driver”, Ghose said.
Dealers carry 7-10 days’ stock with them and it is obvious that if they are allowed to operate and construction activity picks up, they will first try to clear their own stock before asking for supplies from cement producers.
“So it will be a bit of a wait and watch situation for every producer," an industry official said.
Singhi is of the view that the individual house builders – the largest consumers for the sector – primarily use local labourers, which is being gradually permitted by various states and thus demand will recover.
“It is expected that during May, 40-50 per cent of the construction work can start and highway construction is also showing healthy signs of revival. I think it will help boost the demand," Singhi added.
Logistics is another front where companies are likely to face serious challenges. According to brokerage firm Anand Rathi Share and Stock Brokers, logistical issues will persist as the railways are being utilised to supply essential commodities and hence are not available.
“Further, truck drivers may be reluctant. At the lockdown announcement, 400-500 rakes carrying cement were in transit across India. The government has asked trucks which were in transit to continue on to their destinations. This will help meet short-term demand”, the brokerage firm said.
Industry officials are of the view that while some recovery may be seen in construction, led by road, highways, irrigation projects – which account for around 10 per cent of the total cement consumption in the country – institutional demand is expected to shrink as the monsoons will approach by the time some recovery will be seen in that sector. Moreover, individual home builders will also avoid any construction activity during the monsoons.
“As such, no meaningful demand improvement is expected till October”, a sector official said.