The prices of cement in some regions of India are expected to be hiked in the first week of July.
Sources close to the matter said cement manufacturers have given feelers to dealers for a possible fresh hike in cement prices – as high as Rs 10 a bag – next week in Tamil Nadu and Andhra Pradesh.
Meanwhile, they said Mumbai is likely to face cement supply shortage of up to 15-20% due to the monsoon and short supply from Gujarat.
Analysts said cement prices can move up in case of any demand-supply mismatch. South India was the first to increase the price and the rest of India is reported to have stable pricing and is looking at increasing the prices at the first opportunity.
Ajit Motwani of Emkay Share and Stock Brokers told DNA Money: "The cement prices have already increased Rs 10 per bag on an average in South India in the past six weeks. During the monsoon, the sector remains a little low. But the finance minister’s statement that there was never a freeze on cement prices from the government’s side can make cement stock surge further in the coming weeks."
The domestic cement sales grew by 13.7% in May 2007 and demand far exceeds supply and demand could be the significant driver of the cement sector. Industry experts said imports from Pakistan remain a likely threat, even though initial attempts have turned out to be futile.
Pakistani cement companies are awaiting clearance from the Bureau of Indian Standards (BIS) before they try to increase exports to India. Meanwhile, the cement stocks reacted positively on Thursday after Chidambaram’s statement. Leading the charge was ACC which moved up 8.6%. Ambuja Cements, Grasim Industries also logged smart gains.
Some of the other key gainers were Saurashtra Cement, J K Cements, Deccan Cements, Mangalam Cement and India Cements. Mysore Cements went up 5.9%, Ultratech Cemco 5.7%, Shree Cements 4.5%, Dalmia Cement up 4.3% and Chettinad Cement 3.8%.
The cement industry is highly volatile and dependent on the supply chain, and any disruption has serious repercussions. This was evident recently when cement prices in Pune shot up to Rs 300 per bag following a breakdown in the raw mill of Kesoram Industries at Sedam in Gulbarga district of Karnataka.