Buoyed by increasing demand from rural areas, cement prices are staging a recovery in the northern and western markets, but continue to remain stagnant with lower than average price hikes in the South.
According to industry players, the turnaround in prices has been largely on account of increased demand from rural areas following the monsoons this year, with cement prices up nearly 15 per cent in most of northern and western parts during the last month. Prices, however, showed only a marginal increase of less than 5 per cent in the South.
Cement prices had remained stagnant last year mainly because of an addition to capacity due to de-bottlenecking, according to industry sources. The fragmented nature of the industry has also led to intense price competition among players. Prices across all markets had fallen by around Rs 5 per bag (50 kg) during July this year, largely in trend with the softening of cement prices witnessed during the onset of monsoon due to slowing down of construction activity.
According to an India Cements Ltd executive, prices are likely to bounce back even in the southern market from around January next year. A Grasim executive said the June to September monsoon rains should spur construction activity on the back of higher farm output. Demand for cement in rural areas is being driven by higher farm output, and a rise in cotton output should spur demand specifically in Gujarat and Maharashtra, which are among the country’s highest cement-consuming States, he said.
The recovery in cement prices comes in the backdrop of a surge in the global price for cement and clinker, with prices for both the items increasing by approximately 50 per cent. Export prices of cement have increased to $38 per tonne (free on board), as against $25, while clinker prices have risen to $28 against $19.