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Cement: Cooperation pays

Apr 16, 2001

The cement sector has probably staged one of the most dramatic recoveries in recent times. This has been achieved despite the fact that overall growth in the Indian economy has slowed. The credit, rightly, goes to the cement producers, who have ‘cooperated’ to cut growth in cement output. A look at the graph below clearly brings out the ‘cooperation’ in the cement sector that has led to buoyancy in cement prices. Indeed, this cooperation continues and a number of cement plants are likely to down their shutters for maintenance sometime now. This should further support any price hike.

Despite this cement companies have not been performing well on the bourses. This is due to several reasons, one of them being the general market condition. Another likely reason for this is that investors do not anticipate the cooperation to continue for very long, in which case prices could tumble, hurting corporate profitability. But that’s when the cooperation ceases to exist.

Until then, cement companies continue to rake in the moolah!


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