Cement prices to rule firm in FY13: CMIE

Cement prices are expected to rule firm in the coming months due to rising input costs and manufacturing expenses, according to the Centre for Monitoring Indian Economy (CMIE).

"[Cement] prices are likely to remain high in the coming months. The growth is expected to moderate as the base effect sets in. Prices are expected to recover and rise by 6.4% in FY12, after falling in the previous year," the think-tank said in its monthly review.

The prices are expected to average 3.8% higher in FY13, it said.

During the third quarter of FY12, power and fuel cost rose by 10.7% year-on-year (y-o-y) due to twin effects of higher coal prices (both domestic and imports) and cheaper rupee against the dollar.

Freight costs were also higher by 12.5% y-o-y due to increase in diesel costs and surcharge levied by Railways.

The cement price in Mumbai, one of the largest markets, shot up by Rs 42 per 50 kg bag, from Rs 248 in January 2011 to Rs 290 in January 2012. The average price of cement bag was Rs 292 in January 2012, CMIE said.

Meanwhile, the demand of cement is expected to improve in the coming months and growth in despatches is likely to be modest at around 4% during March 2012 quarter, the research outfit added.

Leading cement producer ACC said its production for February 2012 stood at 2.14 million tonne per annum as against 1.97 million tonne in the corresponding period in 2011. The despatches increased from 2 million tonne in February 2011 to 2.15 million tonne last month.

Ambuja Cements' output shot up from 17.91 lakh tonne in February 2011 to 19.93 lakh tonne in February 2012. The despatches rose from 17.74 lakh tonne in February 2011 to 20 lakh tonne in February 2012.

Cement production of Aditya Birla Group-owned UltraTech moved up by 3.02% at 357.28 lakh tonne for the period April-February FY12 as against 346.82 lakh tonne during April-February FY11.

The company's despatches moved up by 3.2% at 357.41 lakh tonne in April-February FY12 as compared to 346.33 lakh tonne in the corresponding period last fiscal.

Cement output of UltraTech for February 2012 stood higher by 4.96% at 34.68 lakh tonne and despatches at 35.17 lakh tonne, up 5.67% over February 2011.

The cement industry expansion is set to moderate, with only 31 million tonne per annum of capacity expected to be added this fiscal, much lower than 55 million tonne added in 2010-11, CMIE said.

However, a slowdown in demand has become a bigger concern, Angel Broking analyst Sourabh Taparia said.