Though eventful, year 2019 was not one of the best years for building materials sector. General economic slowdown coupled with prolonged demand recession in realty sector had their impact on building material sector too. Apart from poor demand there were other issues concerning the industry:
Cement demand remained muted
Often health of the construction sector reveals the health of the economy and the health of construction sector is indicated by cement consumption in the country. No wonder then cement consumption growth remained muted during the year. Poor demand was mainly due to overall slowdown in the economy and also some local reasons like non-availability of sand, change in the government (as in AP), prolonged Monsoon, etc. Though the industry was hoping for 5-6% growth during the financial year 2020, as the year progressed hopes too started receding. However, prices remained above the previous year mainly due to price spike in March-April. Informal understanding among major cement players helped the cement prices to remain at the elevated level. Correction in domestic pet coke price (by more than 25%) and also in imported pet coke price (by as much as 35%) were the saving grace for the industry. Domestic diesel prices also remained muted much to the cheer of cement manufacturers.
At last silver lining on dark horizon for Home Furnishing exporters
According to some home textile exporters, over the last couple of months, there has been an increase in enquiries for Indian products due to the potential escalation of the US-China trade war. In fact, the ongoing trade war between USA and China has given a ray of hope for the Indian Home Textile exporters. Its hoped that if the trade talks fail between these two countries, USA may hike import duties on several commodities including home textiles imported from China which make products from that country costlier. It’s expected that if the talks fail Chinese home textiles may attract duties as high as 25%. However, the clear picture may emerge only in 2020.
Probe into MDF dumping
The government started its investigation on anti-dumping duty on cheap MDF imports in November 2019, and the industry is hopeful that the duty will get finalised by end of current financial year. MDF manufacturers who are reeling under depressed prices are hoping that the government would act soon by imposing anti-dumping duty (ADD) on thin MDF. According to industry sources MDF manufacturers from South East Asian countries have been dumping thin boards in India below cost due to weakness in their core markets. This has affected the realisation for domestic manufacturers in Southern markets. It should be noted that ADD has already been imposed on thick MDF and the industry is demanding ADD for thinner version too.
Falling VAM prices
Falling trend of Vinyl Acetate Monomer, popularly known as VAM, which was started in October last year continued during 2019 also. The average VAM price for the first quarter of this year is $980/tonne as against $1325/tonne during the same period in the previous year. VAM price has gone further down and is presently ruling at $880/tonne. Also, rupee value which was volatile last year has become more stable now. Thus, it’s a double whammy for the adhesive manufacturers. VAM which is a crude oil derivative is the main raw material used in adhesive production. India imports VAM from China, Saudi Arabia and Singapore. Imports from China and Saudi Arabia – which are subject to 7.5% import duty – account for around 37% of India’s total VAM import volume. Remaining 63% of the volume is imported from Singapore.
cPVC price movement
In August, the Union ministry of commerce and industry imposed a provisional anti-dumping duty on imported cPVC resin/compound from producers/exporters from China and Korea. Since the ADD imposed on cPVC resin/compound imported from China/Korea is too high it encouraged the domestic manufacturers of cPVC to hike prices a couple of times. PVC prices too remained volatile and have seen more than 10% price hike during the year. Since, main PVC pipe makers like Jain Irrigation and Kisan are facing problems, there are attempts by others to grab their market share.
ADD on Quartz by USA
In October, the United States Department of Commerce (USDOC), published its preliminary affirmative countervailing duty (CVD) determination on certain quartz surface products from India. Earlier, China accounted for 60% of the USA quartz market. However, with USA imposing anti-dumping duty on Chinese quartz situation dramatically changed providing Indian exporters a window of opportunity. But the euphoria was short lived due to the recent decision by the USDOC to impose anti-dumping duty on quartz imported from India. This decision by the USA has put Pokarna’s expansion plan in Hyderabad in jeopardy.