Cement firms begin raising prices again

Cement firms begin raising prices again
Business Standard, December 03, 2009, Section II, Page 4

Sohini Das / Ahmedabad

But opinion remains divided on extent and duration of the hike.

A second wave of cement price rises is likely within a fortnight, say industry watchers. After “bottoming out” during the second half of the year, the commodity’s prices seem back on track, with a series of hikes expected in the coming two months.

There have already been two prices hikes within a week. After prices were up by Rs 5-10 for a 50 kg bag in the last week of November in western and southern India, prices rose by Rs 8-11 a bag in the Mumbai region yesterday. Stockists and dealers believe the next set of price rises would happen in the north, enjoying comparatively stable prices till now vis-a-vis the south and the west.

Non-trade cement prices had fallen by 20-30 per cent in the past three months and were back at 2005 levels in western and southern India.

Confirming the price rise in the Mumbai market, an industry insider claimed: “We can expect another round of price rises this month, to be followed by another wave in January, but this time in the north.” He did not want to be identified.

Rupesh Sankhe, an analyst based with Mumbai-based Angel Broking, said: “In many areas, end-users, mainly realty players, have been waiting for prices to fall further, as sentiments in the west and south have been bad in the last quarter. This has had a certain impact on the demand-supply dynamics. After players in Andhra Pradesh have already announced price hikes, the same is expected from the north-based players, too, in late December or the first week of January.”

When asked, a Delhi-based stockist said on condition of anonymity that prices would be up by around Rs 5 a bag towards the middle of December. Business Standard got similar responses from stockists and dealers in western India as well, who were selling the commodity from Ambuja Cement, ACC and Ultratech. Ultratech Cement, an Aditya Birla outfit, now also markets Grasim’s production after a merger.

However, the north Indian players maintained that prices would remain stable in the region in the coming months. “We do not see any major swing in consumption trends and expect prices to remain stable,” said Shailendra Chouksey, Director, JK Lakshmi Cement. He, however, added: “Cement prices are traditionally volatile and are difficult to predict.”

“Overall, the demand has been up by 10 per cent so far this year and should continue to be 9.5 per cent during next year,” said H M Bangur, managing director of Shree Cement, that sells nearly 90 per cent of its production in north India and enjoys a 11 per cent market share in the region. He, however, maintained that prices in the north are unlikely to go up and would remain stable in the coming months.

Cement dispatches have risen considerably during November compared to the same month last year, indicating a demand surge. ACC and Ambuja Cements reported a 4-5 per cent growth in dispatches, while the Aditya Birla Group saw a 15 per cent growth. JK Lakshmi Cement dispatches were up 8 per cent from 320,000 tonnes in November 2008 to 346,000 tonnes in November 2009. Shree Cement, the Beawar (Rajasthan)-based manufacturer has dispatched a total of 709,000 tonnes in November 2009.

Highly placed official sources in Andhra Pradesh-based Mangalam Cement indicated that the current prices in the south were not sustainable and margins of companies had started eroding. “They were down to Rs 130 a bag in certain regions, and most players had no choice but to raise prices,” he said.

The sluggish demand in the southern market that had set cement prices on a downward spiral earlier this year now seems to be picking up. Dalmia Cement, a major player in the region, recorded a 28 per cent rise in cement dispatches in November to 280,000 tonnes, reinforcing that demand is once again back. Sankhe claimed that “States have lined up projects of around Rs 2 lakh crore in the public-private partnership mode, and this, coupled with the Commonwealth Games in October 2010, will induce a spurt in demand.”