After two recent hikes in the cement prices in South India, prices are set to go down as a capacity surplus overtakes the slowing demand by a huge margin, according to analysts covering the sector.
There have already been two round of price hikes in the southern region in the range of PKR100-120 in September as cement manufacturers looked to curb losses.
"We believe these price hikes are not sustainable as they are driven by players in the south who fear making EBITDA losses in the coming quarters by taking production cuts. We believe these price hikes in the southern region are unsustainable. They are likely to correct in the coming days as the capacity surplus situation in the region would keep cement prices under pressure," ICICI cement analyst Vijay Goel said.
Cement prices have reached Rs 210 per 50 kg bag in Hyderabad against Rs 146 in August last week. Analysts expect cement manufacturers to curtail capacity addition in sync with fall in demand.
"We expect the pace of capacity addition to slow down significantly from fiscal 2012 onwards," Antique analyst Nirav Shah said.