Cement Makers Team Up Again To Up Prices
After failing to increase sagging cement prices in the east through regulating despatches in December, leading cement manufacturers have come together to increase prices by as much as Rs 12 per 50 kg bag from the present level of Rs 133 per bag.
The new price would be effective from Friday January 4, 2002, trade sources said. If the hike is executed, retail consumers would have to shell out Rs 145 per bag from this weekend.
"We are still far behind than the price level of January last year when it was Rs 170. This is an attempt to crawl back to that level," sources said.
However, a trade spokesman also expressed apprehensions that the effort may fail as there could be undercutting by a section of clearing and forwarding agents and dealers. "Even at the Rs 133-level, bags are being sold at Rs 1-2 lower than market price," he added.
The last attempt by manufacturers to increase prices had collapsed mainly as clearing and forwarding agents refused to follow regulated dispatch mechanism. According to that strategy, despatches to dealers were supposed to be blocked for two days on three occasions, on December 22-23, December 29-30 and on January 5-6, to take the price up to the Rs 148-level.
Industry sources said the current price was unsustainable for manufacturers and the market would have to bear a higher selling price. Traditionally, cement prices start firming up in December and hold out till monsoons due to spurt in civil construction. Prices in Kolkata in January 2001 were at Rs 170-175 but have been falling since then.
This price gambit is the fourth such move by leading manufacturers in the last five weeks. However, all earlier attempts had collapsed as one or the other among manufacturers broke ranks and began undercutting the price. Industry sources said large inventory had forced companies to sell below the agreed price band.
In November, all leading cement brands in Kolkata crashed by Rs 10-15 despite efforts to fight the price fall by major manufacturers. Some manufacturers expected prices to go up in December and swing back to October-end level of Rs 135-140. However, prices continued to languish at Rs 128 level as against the ideal Rs 170-75-level, forcing manufacturers to sit down again to discuss prices.
Consolidations of interests in the cement industry have helped price hike initiatives. The recent acquisition of 10 per cent stake in Larsen & Toubro by Grasim Industries has sparked off a spate of consolidation moves that began with Gujarat Ambuja buying 14.4 per cent stake in ACC. The newly-reorganised industry is expected to give manufacturers greater control over cement prices, and thereby make better realisation possible.