India: cement prices may increase

India: cement prices may increase
Published: 14 August 2008

Cement producers in Indaia are likely to raise prices after an agreed moratorium with the Union government ends on Thursday, as the industry continues to face rising costs of raw materials such as imported coal.

“We must increase prices by about Rs15 a bag to recover cost hikes,” Sumit Banerjee, chief executive of India’s largest cement maker ACC Ltd, said by email. “We are discussing with the government, through the Cement Manufacturers Association, to find ways to mitigate the impact of excise duty and coal cost increases as well as non-availability of railway rakes for the industry as a whole.”

Most analysts, however, are expecting only a token hike except in southern India, where demand could drive prices higher by Rs8-10 per bag. A bag of cement typically weighs 50kg.

Cement companies had agreed in May to not increase prices for three months, for fear of fuelling an already rising inflation. Based on wholesale prices, inflation has risen to the highest in 13 years on the back of record crude oil and food prices.

India had also imposed a ban on cement exports and an export duty on steel products to keep a check on domestic prices. The cement ban was partially rolled back later, but the government has tried to keep a tight leash on prices of all sensitive commodities that contribute to the Wholesale Price Index, which is used to measure inflation.

Additional local capacities that have narrowed the gap between supply and demand are more likely to keep cement prices in check.