Cement takes beating in southern India

Cement takes beating in southern India
Published: 06 September 2004

After holding on for months, cement prices have finally taken a beating in the southern states during the last 3-4 weeks, with Tamil Nadu witnessing the sharpest decline at Rs 25-30 per bag (reports The times of India). It’s the sharp fall in government demand that is making things difficult for south-based cement manufacturers. In fact, while cement prices are ruling firm in the rest of India, even during the crucial monsoon months, the southern states have faltered with very little demand from government agencies.

Cement prices in Tamil Nadu, as a result, have declined to Rs 130-135 per bag from Rs 155-165 less than a month ago.  In Andhra Pradesh, prices have fallen from Rs 135-140 per bag to Rs 120-125 per bag during the period. In Kerala cement prices are down to Rs 140-145 per bag, while in Karnataka it’s down to Rs 145-150 per bag.

Industry players say that the downturn in prices is largely a fallout of poor demand, mainly from the government agencies, which has led to a 10% decline in volumes for the region as a whole. "The price weakness has nothing to do with the monsoons.  The monsoons will hit Tamil Nadu only in October. The fall in prices in the southern states is due to the continious decline in demand over the last four months," said an industry official.

However, the upside, analysts say, is the fact that the current prices are still higher by Rs 10-15 per bag compared to last year.  "The price decline in the South is not as sharp as in previous years. Although the demand situation in the region remain sluggish, we expect prices to witness some sort of a correction in the next few weeks," said an analyst.

Analysts say that the south-based cement makers, who for the last few months managed to keep prices firm by regulating supplies, had to finally give in as demand was not showing any signs of revival. Besides, it’s the only region where a demand-supply mismatch continues unabated.

"As things stand today, there is very little government buying in Andhra Pradesh and Karnataka. The demand situation in Tamil Nadu, which had shown some improvement in July, is again down in the dumps," officials said.