In a trend that suggests cement producers may be teaming up to see that prices do not come down, cement prices, pan-India, have been rising since September 2010. This is despite the fact that demand for the commodity has been rather subdued, across most of the country, in part due to a prolonged monsoon.
If dealers are to be believed, cement prices have risen by Rs15 per 50-kg bag in Gujarat and by Rs 7 per bag in Mumbai in the last ten days.
There are, of course, a few pockets where prices have declined. For instance, prices have declined by Rs10 per 50-kg bag in Chennai, Lucknow and Kolkata in the past ten days, with supplies hitting the market. “The price increase of Rs10 per bag, effective from October 20, 2010, in New Delhi, was reversed on October 28, 2010, with few takers. Prices, nevertheless, are expected to remain stable in the western, northern and central regions for the next few months, with the seasonal pick-up in construction,” says an IIFL report.
Once producers benefit from the higher cement prices and gain market share, prices could come down again in the southern region. Indeed, with the monsoons over, demand is seen improving. “With improved demand growth we expect margins to return to peak levels sometime in 2012- 2013,” said Grasim Industries in its post-results announcement. Margins of cement players peaked sometime in the first half of 2009- 2010 and stood at around 30%- 40%.
However, dealers are cautious about demand from the residential segment; the sharp increase in the cost of building materials may delay purchases. The IIFL report also observes that tightness in sand availability in Maharashtra, Kerala and Andhra Pradesh and brick availability in Tamil Nadu are leading to delays in construction. “The demand from the real estate space is currently is very low but companies are nevertheless increasing prices in anticipation of demand in the third and fourth quarters,” said a Mumbai-based dealer.
Saudi White Cement Co. (SWCC) has signed a SAR152.6m (US$40.7m) contract with France’s Fives FCB as part of plans to expand daily production capacity to 1000t from 700t at present, Saudi-based Al Riyadh daily reports Saturday, citing SWC’s chairman Prince Faisal bin Abdul Majid bin Abdulaziz.
The expansion project, which is expected to be completed in mid-2012, will boost the plant’s annual output to 350,000t, which will represent about 60% of local demand for white cement, the paper reports.