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| Wagon shortage spikes cement prices in West, South India |
| Sohini Das / Ahmedabad Nov 29, 2009, 00:45 IST |
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Prices have firmed up by Rs 5-10 a bag in the region.
After falling 20-30 per cent in the last three months, cement prices have started moving up in western and southern India, thanks to the shortage of railway wagons. Prices in these regions have firmed up in the range of Rs 5-10 for a 50-kg bag in the last one week.
“There is a sudden shortage of rail wagons for transporting the commodity. Wagons are being diverted to foodgrains and fertilisers. So, now cement players are moving the commodity from the plant to the stockists via road, which is more expensive,” said Vinod Juneja, managing director of Binani Cement, a western India player.
He was quick to add that the inventory was not yet piling up at the plants. There is a cost difference of 5-7 per cent between rail and road transportation.
A couple of industry watchers contacted by Business Standard said the shortage of rail wagons could act as a trigger for hiking cement prices in the long run.
In late 2005, a ban on overloading of trucks had triggered a price hike for the commodity which got further worsened in the next two years due to rising fuel and input costs.
“In western India, however, prices in Gujarat are yet to see a major rise as transportation cost here is low because of proximity to plants,” Juneja said. An official of a Kutch-based cement company claimed on grounds of anonymity that all players would go for increasing prices from December 1 by Rs 5 a bag. Prices in the region are now around Rs 190 for retail, while the non-trade price is as low as Rs 160 in places close to the manufacturing facilities in Gujarat.
Rupesh Sankhe, an analyst with Mumbai-based Angel Broking, claimed that prices were up not because of a demand pull, but entirely because of logistical issues. While Sankhe thought that the current surge in prices could be short-lived, Sanjay Ladiwala, president, Cement Stockists and Dealers’ Association, felt that this could as well act as a trigger for a turnaround in prices that had seen a sharp fall recently. Ladiwala, however, maintained that the wagon shortage cannot be a long-term issue to impact prices.
Prices in Mumbai are up by around Rs 5-7 a bag at around Rs 240-245 now. Major players such as ACC, Ambuja Cements and Ultratech Cement are selling a 50-kg bag for around Rs 235 to Rs 245 now. When contacted, an Ambuja spokesperson said, “We do not monitor prices on a daily basis. Prices are dictated by the market, which is a highly competitive one.”
Down South, prices in Andhra have started firming up from Rs 145 nearly a month ago to Rs 155-160 now, while in Karnataka and Tamil Nadu, the commodity is selling for Rs 165 and Rs 175, respectively. Industry insiders claimed that Madras Cement and Dalmia Cement, that together command nearly 40-50 per cent of the southern market, can go in for a ‘pricing discipline’ to check falling prices that had dipped below Rs 140 in October. Andhra and Karnataka have seen maximum capacity additions in recent times, resulting in a huge drop in prices there. In Andhra and Karnataka, about 20 million tonne per annum (mtpa) capacity is likely to be added in the next two years.
In north India, however, prices are yet to see a steep rise because of the recent wagon shortage.
“Though there is a wagon shortage, prices here are stable,” claimed HM Bangur, managing director of Shree Cement, a major north India player and the immediate past president of the Cement Manufacturers’ Association (CMA). Prices in the north have not seen a southward move off late, mainly driven by huge demand created by the upcoming Commonwealth Games in October 2010.
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