In what could possibly be one of the highest price increases in a single day, cement manufacturers have joined hands to hike cement prices in Gujarat by a whopping Rs500 per tonne, or Rs25 per bag, from Tuesday. As a result, retail cement prices in the state, which had hit rock bottom following an intense tussle for market share among manufacturers, have shot up from Rs110 per bag to Rs135 per bag in one go.
Industry observers say that while the price increase was initiated by local player Saurashtra Cements, other manufacturers are likely to follow suit. Members of the Cement Manufacturers Association, the apex body of cement producers, it is learnt, are meeting to formalise the price increase (reports The Times of India).
The move comes in the wake of a sharp decline in realisations in Gujarat, particularly in the past three months when manufacturers upped their dispatches to grab higher market share. This move in turn, boosted cement consumption in the state considerably. However, with this latest price increase, cement manufacturers have raised realisations to September-October ’04 levels. Manufacturers say that the move to increase prices is a "corrective step," given the sharp decline in realisations in recent months. "Manufacturers were all losing money and there was no option but to raise prices. It is just a correction," said an industry official.
Meanwhile in Mumbai, the largest market, cement prices have risen by Rs 12 per bag since last week to Rs 170 per bag. Industry observers say that the Gujarat price increase is likely to have a ripple effect in city prices as well. Gujarat is among the largest cement producing states with a capacity of 15Mt. Total cement demand is, however, only 7Mt, and the excess output finds its way to neighbouring states.
Industry sources say that the price situation in the state worsened following the decision of Sanghi Industries, which commissioned a 2.6m-tonne greenfield facility, to grab higher market share. The firm’s market share in the state doubled to 20 per cent, causing concern to market leaders, including the AV Birla-controlled UltraTech Cement and Gujarat Ambuja Cements.
In fact, this tussle for market share has resulted in a fall in exports says The Times. The west-coast-based manufacturers got busy fighting for market share in ’home turf’ Gujarat, even though export realisations continued to be more attractive at $42/t, which is higher than average domestic realisations for cement manufacturers.