Cement from abroad to rein in local prices, India

Cement from abroad to rein in local prices, India
Published: 11 September 2007

With India opening its doors for cement imports, many local companies have begun buying the commodity from neighbouring countries, including Pakistan. Though it may not trigger a price war in the domestic market in the immediate future, the imports are adequate to keep cement prices under check. However, if the imports, currently a trickle, get streamlined, it may have an impact on domestic prices, according to industry observers.

Nitco Tiles, a Mumbai-based tile maker, is importing 1Mt of cement from Pakistan. The National Builders’ Association (NBA), a lobbying group of real estate developers and construction companies, has directly placed orders for 25,000t with Pakistani firms.

The landed cost of Nitco’s imported cement is pegged at around Rs 225 per bag in the Mumbai market, while it is around Rs 200 per bag for NBA’s import. These are 22% and 28%, respectively, less than the current price of Rs 280 per bag in Mumbai. Nitco is importing through the MMTC Ltd, the nodal agency for importing cement from foreign companies.

Foreign companies registered with the Bureau of Indian Standards (BIS) can strike deals directly with Indian importers. Maple Leaf Cement and Pakistan Cement Company are among the five Pakistan companies registered with BIS. Sources said many Indian builders such as Kalpataru and Hiranandanis are in negotiations with foreign firms for direct imports.

However, since India’s production capacity is 160Mt, import of a few million tonnes is unlikely to make any impact. Deepak Jasani, head, retail research, HDFC Securities, said cement imports by a few firms would not have any impact on domestic prices immediately. He cited various reasons for it, like the total quantity of cement imported, the availability of repackaging facilities, and a lack of port capacity for large quantities of imports.

“However, if the imports continue for a few quarters, it will impact cement prices in cities that lie in close proximity to ports,” said Mr Jasani. He said the prices would be under pressure if bulk cement buyers start importing large quantities of cement.

A senior official from a leading cement manufacturing firm agreed that if bulk buyers started to import, then prices would be under pressure. Vivek Talwar, managing director, Nitco Tiles, told ET that they were importing cement from the Karachi-based Lucky Cement. “Our first consignment will be landing in Mumbai soon,” he said, adding that they would sell it at Rs 240 per bag, as against the landed cost of Rs 225 per bag.

In an effort to curb rising cement prices, the Union government had removed all duties on cement imports and had even sought co-operation from cement manufacturers to hold their price line at Rs 190 a bag.

As per the new policy, if corporates want to import cement, they can file an application with BIS and import cement through MMTC. However, foreign manufacturers have to be registered with BIS. Industry sources said so far, 20 foreign firms, including three from China have registered with BIS. Cement firms from Pakistan, the UAE, Bangladesh and Bhutan have also registered with BIS.

Sources said many Indian firms are planning to import from Pakistan, where the production exceeds demand by almost 5Mt.