The recent drop in Indian cement prices has added to the pressure on the profitability of companies in the sector. Prices in the south have fallen by Rs20-70 in the last two months to average around Rs165 per 50kg bag owing to a decline in demand amid the oversupply.
And the situation could get worse, with dealers expecting further slide in prices. A Chennai based cement stockist said, “There is no revival in demand and we are expecting another round of price falls in the coming weeks. We were hoping for a strong pick up with tendering over for various projects, but now, with the monsoons setting in, it’s going to be difficult.”
Prices in Andhra Pradesh have fallen to Rs150-155 per bag and are currently at Rs230-240 per bag in Chennai.
An Andhra-based B grade cement manufacturer player had said recently that the cost of production is close to Rs120-140 per bag. So that leaves very little for profits.
Freight costs in the state are Rs10 lower than in states in other regions. So the situation could be worse in the rest of the country.