Cement prices to remain subdued in coming months

Fall after January-February recovery to continue

After seeing some revival during January and February, cement prices came under pressure in March and April. With the monsoons coming and demand remaining sluggish, industry expects further correction.

Demand, weakened during July-December 2012, saw some recovery in mid-January. Prices increased Rs 5 a bag in Delhi, Rs 21 in Chandigarh, Rs 36 in Kolkata and Rs 7 in Mumbai between December and February. However, with no significant demand, those have come under pressure in March-April, slipping Rs 5-15 a bag in the north and Rs 10-30 in the west. In the south, prices have dropped three-four per cent, said an Icra report. It added the Hyderabad market had seen some volatility in prices. While prices remained in the range of Rs 228-232 a bag till March, those declined to Rs 223 in April. Average prices in March had reached Rs 300 a 50 kg for a brief period. The price is currently around Rs 287 a 50-kg bag.

Balaji K Moorthy, senior vice-president, marketing, Madras Cements, said, "The market is not growing, there is hardly any demand. The slowdown has taken a toll on infrastructure spending. Capacity addition in recent years is another reason for pressure."

South India has seen some major capacity addition in recent years. Ravi Sodah, cement analyst with Elara Capital, said the installed capacity in the south was 120 million tonnes per annum (mtpa). It was 106 mtpa in FY11. "Capacity utlisations are lowest in the south, at 65 per cent. The all-India utilisation levels are 76-77 per cent," he said.

Prices in the east are highest, over Rs 300 a bag. In the west, those are Rs 250 and in the north, Rs 270-280. "In east, the volume base is small. Plus, there are not many who feed this market. Hence, competition is less, and even a slight jump in demand can result in the firming up of prices," said Sanjay Ladiwala, president, Cement Stockists & Dealers Association.

Insiders feel prices would come under more pressure, with the onset of the monsoon. Sodah said, "Not much firming up of prices is expected." Ladiwala said prices could come down in the east and north, at Rs 10-15, or even more. "Prices in the south and west would remain relatively unaffected, as they are already subdued," he said.

Financial year 2013-14 being an election year, infrastructure spending is expected to pick up. H M Bangur, managing director of the north-based Shree Cement, said, "Prices would remain volatile. While there is a slowdown, this being an election year, we expect some demand rise."

Moorthy echoed that. "With elections round the corner, we are expecting some reversal of the trend, and expect demand to pick up."