Cement to get costlier, again

Cement to get costlier, again
Published: 27 February 2008

Cement prices in parts of India are expected to go up from first week of March by Rs 5-7 per bag, sources said.

The retail price per 50 kg bag is expected to touch Rs 275 whereas the wholesale prices will be around Rs 260 per bag in Maharasthra.

The prices were last hiked by Rs 5 in February.

A Mumbai-based cement dealer said on condition of anonymity: “We are getting feelers from top cement companies for another price hike next week. A hike of Rs 5-7 per bag would be expected soon from Ultratech, ACC and Indorama.”

Cement dealers across the country were confident of demand picking up in March to June. They are confident due to growth in infrastructure projects and also expect rising demand from corporate expansion projects. Cement dealers in southern states, Orissa and Chhattisgarh also expect an increase by June.

Another cement trader in Goregaon, B Raja, said cement prices likely to soar in the coming moths due to peak season. He admitted that there has been a shortage of cement supply from companies for the past few weeks, indicating a price hike. Many dealers in Maharashtra also said the supply was impeded in the beginning of the month due to a shortage of rail wagons.

Analysts said prices in Andhra Pradesh have declined by Rs 4-5 per bag and in Uttar Pradesh by Rs 2-3 per bag. Cement off take in Andhra Pradesh is low at present because of a slowdown in government-sponsored housing and infrastructure projects, coupled with unseasonal rains. Prices are likely to recover after 2-3 weeks. They believe that possibility of price hike by around Rs 5 in Gujarat and southern markets next week. They don’t expect prices to soften in the near-term.

“The costs of coal and petcoke have gone through the roof,” AK Saraogi, chief financial officer and president, corporate affairs, of JK Cements, had said recently. Coal constitutes around 12 per cent of the total operating cost of cement makers, while coal prices have risen by 10-15 per cent in the recent past.

Industry experts said in the month of March, Public Works Department construction activity increases as they try to deploy allocated funds before the end of the fiscal year. The catch is: if the allocated funds would not be used before the fiscal ends, state governments do not allow allocation to be carried forward to the next year.

According to Centre for Monitoring Indian Economy, the cement prices showed an upward trend during April-January 2007-08, year on year. Prices rose by 12 per cent in Mumbai and Kolkata. Chennai and Hydrabad observed a hike of 24 per cent each from last year. Continued buoyancy in cement demand, backed by housing and infrastructure sectors, and cost pressure faced by cement companies would keep cement prices firm in the medium term.