The cement space has been at the receding end of investor selling. One of the reasons is the recent hike in the raw material prices. Talking about the hike in coal prices, Ashish Guha, managing director of HeidelbergCement, said that the company hasten a rise of around 30% in raw material prices for cement as coal prices surged. “A and B grade coals have gone up by almost 150%, while the C,D,E and F grade coals have gone up by 30%,” he explained.
He added that the ensuing price hike in cement sector is to counter the rise in raw material costs and not a result of rationalised production. “We are going flat out. We produce about 100% of the capacity utilisation," he said. "Over the last year, we saw huge dip in margins that no company can sustain. Hence, we are trying to improve our margins by passing on the costs that are going up,” he adds.
According to Mr Guha, the company has not experienced any demand resistance yet. "We haven’t seen any demand resistance at all. Demand is going at about the same 9% to 10%. It is essentially the supply that has come up. The supply mainly has come up in the South of India, and partially, in the north of India. In south India you will see massive price cuts."