Cement prices not likely to fall
The Financial Express, April 15, 2009, Page 3
Smita Joshi Saha, Mumbai
The hue and cry raised regarding the government trying to once again keep a check on domestic cement prices seems to have faded out. The government has not issued any letter to the cement industry, said sources.
As per news reports, the Department of Industrial Policy and Promotion (DIPP) was to issue a letter to the Cement Manufacturers Association (CMA) to cut cement prices. Industry watchers feel that it’s more of a hullabaloo with the general elections round the corner.
Industry players, on condition of anonymity, said prices cannot be just reduced immediately. Price rise is a temporary phase and will rationalise once the monsoon sets in, they said.
“From banning exports and imposing 12% ad-valorem duty on cement selling above Rs 250 per 50 kg bag to making cement import duty free, the government has intervened several times. This had resulted in an uncertain price environment, which, together with a significant increase in input costs, has had an adverse impact on margins,” said a cement manufacturer requesting anonymity.
Ignoring any kind of intervention, cement players are at present betting big on the first two quarters of the current year to be reasonably good on the backdrop of government’s stimulus packages. Prices are also expected to rise further marginally in the short term and realisations would be better, say industry players.
“We expect the first two quarters of 2009 to be reasonably good for the cement industry due to the government’s focus on infrastructure and low-cost housing. Good retail demand coming from semi-urban and rural markets will also contribute,” said ACC chairman NS Sekhsaria while addressing the company’s 73rd annual general meeting.
Binani Cement managing director Vinod Juneja said, “At present, there is no sign of demand slowdown. We are expecting good realisations in the fourth quarter. Prices may rise by Rs 2-3 per bag if demand continues to increase at the same pace.”
Meanwhile, Enam Securities in its recent report said, “Cement prices have recently increased by Rs 6-30/ bag due to supply shortfall on delay of most planned capacities, higher ramp up time for new plants and breakdown of existing plants. However, we expect prices to start softening from monsoons and drop significantly in H2 FY10, as new supply (46 million tonne of fresh capacity by Mar 2010) hits the market and demand growth slows.”
Experts believe that the Ebitda margins of the top cement companies in the fourth quarter is expected to be in the range of 32-35% against an average 24% in Q3 FY09.
The Financial Express, April 15, 2009, Page 3
Smita Joshi Saha, Mumbai
The hue and cry raised regarding the government trying to once again keep a check on domestic cement prices seems to have faded out. The government has not issued any letter to the cement industry, said sources.
As per news reports, the Department of Industrial Policy and Promotion (DIPP) was to issue a letter to the Cement Manufacturers Association (CMA) to cut cement prices. Industry watchers feel that it’s more of a hullabaloo with the general elections round the corner.
Industry players, on condition of anonymity, said prices cannot be just reduced immediately. Price rise is a temporary phase and will rationalise once the monsoon sets in, they said.
“From banning exports and imposing 12% ad-valorem duty on cement selling above Rs 250 per 50 kg bag to making cement import duty free, the government has intervened several times. This had resulted in an uncertain price environment, which, together with a significant increase in input costs, has had an adverse impact on margins,” said a cement manufacturer requesting anonymity.
Ignoring any kind of intervention, cement players are at present betting big on the first two quarters of the current year to be reasonably good on the backdrop of government’s stimulus packages. Prices are also expected to rise further marginally in the short term and realisations would be better, say industry players.
“We expect the first two quarters of 2009 to be reasonably good for the cement industry due to the government’s focus on infrastructure and low-cost housing. Good retail demand coming from semi-urban and rural markets will also contribute,” said ACC chairman NS Sekhsaria while addressing the company’s 73rd annual general meeting.
Binani Cement managing director Vinod Juneja said, “At present, there is no sign of demand slowdown. We are expecting good realisations in the fourth quarter. Prices may rise by Rs 2-3 per bag if demand continues to increase at the same pace.”
Meanwhile, Enam Securities in its recent report said, “Cement prices have recently increased by Rs 6-30/ bag due to supply shortfall on delay of most planned capacities, higher ramp up time for new plants and breakdown of existing plants. However, we expect prices to start softening from monsoons and drop significantly in H2 FY10, as new supply (46 million tonne of fresh capacity by Mar 2010) hits the market and demand growth slows.”
Experts believe that the Ebitda margins of the top cement companies in the fourth quarter is expected to be in the range of 32-35% against an average 24% in Q3 FY09.
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