Riding high on strong demand, the cement industry in India has been witnessing new peaks in prices, even after scaling up capacity utilisation.
In fact, cement prices have surged 30-40 per cent per bag (of 50 kg) in the last one year, across the country. In Mumbai alone, prices went up in the last two months, by Rs 3 in October and Rs 5 last week, to reach Rs 223-225. And it may be revised again in a couple of months.
Average price in Delhi is ruling at Rs 208 per bag whereas in Kolkata it is hovering between Rs 205 and Rs 215, up Rs 8-10. Prices have slumped in two states - Tamil Nadu and Andhra Pradesh - by Rs 5 to Rs 185-195 a bag. In Kerala and Karnataka, prices have been stable for quite some time.
"Demand is growing strongly and so far there is no major capacity addition, which is putting upward pressure on the cement prices," said J Radhakrishnan, research analyst with India Infoline Ltd.
He added, "While the cement demand is growing at 10 per cent annually, capacity addition is happening at 5-6 per cent which will continue next year as well."He said, "We can expect next price revision in January." Observers say the price spiral would continue in FY08 till the demand-production mismatch continues.
The present installed capacity of the Rs 45,000 crore Indian cement industry is 160.24Mt. However, production realisation was 90 per cent at 141.81Mt in 2005-06. Now, the utilisation has also went up to nearly 93 per cent this year. Several capacity expansion plans announced so far will add another fresh capacity of around 75Mt by 2009-10 taking it to a total of 235.24Mta.
According to a report by India Infoline, all India cement sales figures improved by 7.96 per cent YoY to 12.55Mt. Sales for the seven month period ended October 2006 increased by 9.98 per cent to 86.27Mt. The industry has seen increase in sales by 7.96 per cent despite an increase in production capacity by 5.96 per cent only. The capacity utilisation of the industry has gone up from 90.24 per cent to 93.24 per cent. [Source: Business Standard].