Cement prices in southern India likely to hold

Cement prices in southern India likely to hold
Published: 04 October 2007

Cement prices in the South are firm and are likely to hold for now reports
Business Line. Normally, prices would drop at this time on slack demand due
to rains and the start of the festival season. But the situation is expected
to change radically in November when demand picks up. There could be a
tightening of supplies and buoyant prices, say industry sources.

For now, manufacturers say a tight supply position and healthy demand are
helping to hold prices steady. Last month, prices dropped by Rs 2-3 in some
cases but that has also stopped. Most manufacturers in the South have just a
day’s worth of cement stocks, they say.

Apart from the demand, there is a drop in fly ash availability in the market
because some of the thermal units have shut down. So the supply of fly ash
for blending has dropped. Blended cement can contain up to 30 per cent of
fly ash. This has also contributed to the tight supply of blended cement,
they say.

Prices in the South range around Rs 248-250 a bag in Tamil Nadu, Kerala and
Karnataka, and Rs 215-220 in Andhra Pradesh, and are not likely to change
for now, they say.

The production capacity in these southern States is about 52Mt
— about a third of the country’s production capacity. But the production
units are stretched and are unable to even take up preventive maintenance
that is usual for the season. Capacity utilisation in Tamil Nadu and Andhra
Pradesh, which account for about 80 per cent of the production in the South,
is about 115 per cent, say manufacturers.

In Andhra Pradesh and Tamil Nadu, the demand is growing far ahead of the
average 10 per cent for the country. According to analysts, Andhra Pradesh’s
consumption in August grew year-on-year by more than 30 per cent and in
Tamil Nadu by nearly 15 per cent. The demand is expected to pick up further
from November and this could spell a further period of buoyant  prices.