Cement prices are likely to go up by Rs3 per bag in Mumbai, Gujarat and the southern markets from Monday. Other markets in the country are expected to follow suit later.
This is a rare development as cement prices usually go down in the rainy season. Cement makers attribute the hike to rising raw material prices and higher transportation costs. The cement makers have increased prices by 4% in the past one year, with the last hike coming five months ago. In Mumbai, a 50-kg bag of cement now costs around Rs 235.
Leading cement players confirmed the imminent price hike. ACC managing director Sumit Banerjee told ET, "There is a possibility of a slight increase of Rs 2-3 per bag as oil prices have already had an impact and the cost of transportation has gone up. Even after the hike, cement prices will continue to be cheaper than some other essential commodities."
"We want to hold cement prices, but input cost pressure has eroded our margins. We are planning an increase of Rs 3 per bag in the next few weeks," said Binani Cement MD Vinod Juneja.
Cement Manufacturers’ Association president Shree Cement managing director HM Bangur also said that prices will go up from Monday in the western and the southern regions. However, the northern markets will be able to stay away from the hike, he said.
Mr Juneja said a 60% rise in coal prices has forced companies to revise their prices. Coal is a major component in cement production. Moreover, there is a pressure from trade unions to increase employees’ wages due to inflation.
Revised wages would also put further pressure on cement prices, he added. Analysts don’t expect cement prices to soften in the near term, especially with demand growing at over 10% a year.
Over the longer term, however, they expect prices to fall as new production capacities come on line.
Said Angel Broking research head Hitesh Agrawal, "It’s surprising that cement companies are increasing prices in the monsoon season. But they are under pressure as their bottomlines have been hit hard. It is expected that the government may not make a hue and cry this time as input costs have gone through the roof."