India: cement prices remain low in southern markets

India: cement prices remain low in southern markets
Published: 18 August 2010

Cement prices in Andhra Pradesh, in particular, and southern markets, in general, continue to be on the lower side due to increased supply and slow pick-up in demand. The price range of cement now is between INR135 and INR160 a bag (ex-godown).

“The price now is lower than the break-even price. I see this as result of increased supply,” Mr Srikant Reddy, executive director, Sagar Cements Ltd, told Business Line.

“Not only in Andhra Pradesh, entire southern markets are down. I see this as cyclical in nature due to demand-supply dynamics. For the next 12-18 months, there is going to be pressure on the industry,” he added.

The recent increase in inputs’ prices, including fuel, was also an additional burden on the industry, Mr Reddy said.

According to a senior functionary of Bheema Cements Ltd, the price was on the lower side two weeks ago and has picked up a little now. “However, the price range is unviable for industry,” he said.

In September-October 2009, prices had hit a low at the INR125-135 band, which marked a decline of over 20 per cent compared with the previous year. Though the price recovered to the over INR165-185 range later, the downward spiral began again in May 2010, according to industry sources.

The reasons include capacity additions and the onset of monsoon, which slowed the demand. In Andhra Pradesh, the largest market, the monthly despatches are at about 20Mt. According to industry estimates, about 55Mt of new capacity could be added in the country, during the current financial year. The total demand in the country is pegged at 198Mt, against capacity estimates of 250Mt.

This accounts for over 20 per cent of the installed capacity of 2009-10. During last year, 42Mt of capacity was added. Prices range between INR135 and INR160 a bag now. Increase in input costs, including fuel, adding to the burden.