Cement prices firm up on wagon constraints

Cement prices firm up on wagon constraints
The Financial Express, December 21, 2009, Page 2

Smita Joshi Saha, Mumbai

After seeing a fairly sharp fall of around Rs 50-60 per 50 kg in the southern and western regions of the country, cement prices are firming up again. The increase, say industry watchers, has more to do with logistical constraints resulting from a shortage of railway wagons, rather than some sudden spurt in demand from users of the material.

Prices have firmed up in the western and southern regions since early December and could move up by another Rs 5 per bag in Mumbai this week, say cement dealers. “We have been informed by all the major cement producers about the price increase of Rs 5 per bag from Monday onwards,” said a Mumbai-based cement dealer requesting anonymity.

After falling sharply by Rs 30-80 a bag over the past three months, cement prices in the southern market of Andhra Pradesh have registered a slight increase of Rs 10-15 a bag. Prices in the southern markets are currently ruling in the range of Rs 135-180 a bag, whereas in some pockets, it is also being sold at Rs 230-250 a bag.

In the western region, which includes Mumbai and Gujarat, cement prices have seen an increase of Rs 8-10 a bag since December 1 onwards. Cement prices in Mumbai are in the range of Rs 220-250 a bag, whereas in Gujarat, a bag of cement is being sold at Rs 170-190.

Confirming the move to hike prices, Binani Cement managing director Vinod Juneja said, “There will be a price rise of about 2-5 per bag from Monday onwards in some markets, including Mumbai.” According to Juneja, apart from the shortage of railway wagons, there has been some increase in demand for the commodity due to construction work and for the 2010 Commonwealth Games. That, together with the fact that fuel costs have risen, has prompted producers to raise prices. Price of imported coal has increased and is currently being imported at $80 per tonne from $50-55 per tonne in September.

Industry watchers say this upward trend appears unsustainable as excess supply continues to flood the market. With the current capacity at 233 million tonne, Indian cement industry is growing at the rate of 7-8% and is expected to add another 40-50 million tonne in the next one year.

However, cement prices in the northern and central regions have recorded pricing dips of Rs 10-15 in past one month, while the eastern market remains stable.

Industry sources say, with small producers increasing capacity multifold and new players entering the southern and western markets, pricing discipline is tough to emerge.