Cement prices set to stabilise

Cement prices set to stabilise
Published: 19 March 2004

Cement prices in Andhra Pradesh, India are expected to cross Rs160 per bag in May and stabilise in that region for the next six months on current indicators, say local news reports. Unlike in the past, this time the price hike may not need any concerted effort by the industry and may occur automatically due to factors like a drop in cement supplies from other states, exports and new infrastructure projects that will kick off in the next financial year.  Industry observers here are confident that only the month of April may be an exception with depressed prices due to elections.

During the last seven months, the cement industry in Andhra Pradesh went through a volatile phase. The prices plunged to a three-year-low of Rs 85 in September and then recovered rapidly to hit a high of Rs 165 in December. The prices hovered at around Rs 145 in Hyderabad in January.  Industry sources in February expected prices to touch Rs 140-150 by March end. However, current prices in the Hyderabad market are around Rs 130.  The prices were Rs 115-125 in Chennai, Rs 120-125 in Bangalore, and Rs 120-130 in Thiruvananthapuram during September 2003 as against the current prices of Rs 150-160 in Chennai and Bangalore and Rs 160-170 in Thiruvananthapuram.

The increasing trends of exports from players on the west coast, Gujarat and Rajasthan, have also ensured that cement supplies have not been diverted to Maharashtra which is a big consumer. Consequently, there has been a cascading effect with reduced supplies from Maharashtra to AP and the south.  Exports from Gujarat and Rajasthan have touched 4.8Mt till January this fiscal, and the total exports are likely to cross the 5.5Mt mark, according to industry sources. An offshoot of this is that Andhra Pradesh also made a beginning in export of clinker this year.

So far over 300,000t of clinker have been exported to countries like Bangladesh, Singapore, Burma from the state. Indications are that there will be good potential for much higher exports from AP, Tamil Nadu and Karnataka in the coming year.  A decade back, the Andhra Pradesh plants used to despatch cement to all parts of the country, and now the trend is expected to be repeated giving the much-awaited strength to the AP-based plants.The mismatch between supply and demand is expected to narrow down considerably in the coming years.

At present, there are 24 major cement plants in Andhra Pradesh with a total installed capacity of over 24Mt. Of them, 21 are members of Cement Manufacturers Association (CMA). Four plants of CCI, Andhra Cements Panyam and Krishna Cement Works are not operating at present.  After a gap of two years, Panyam Cements was said to have operated only for sometime this year. The 20 major companies operating now account for a total installed capacity of around 23Mt. Of the originally started 30 mini cement plants in the state, only 10 are operating with a total capacity of around 2.24Mt.  Total cement despatches in the state in the last financial year were 10.38Mt. Of this around 1.5Mt were expected to have come from outside the state.