Post-Budget, cement prices move north

Cement prices across regions have gone up by Rs 5-10 per bag following the Budget announcements of 2 per cent rise in excise duty, cess on coal going up and an increase in diesel prices. Prices of the building material in Chennai and Bangalore in the South and Mumbai in the West have logged the biggest rise of Rs 10 a bag.

Dealers feel that the rates could rise further in Mumbai on account of strong demand. Prices in Andhra Pradesh have increased by Rs 10 a bag on account of the excise duty hike and a weekly one-day power cut declared by the Andhra government. New Delhi and Rajasthan have witnessed a price rise of Rs 8 and Rs 6, respectively.

In the Central region, particularly in Uttar Pradesh (Lucknow), prices are at a high of Rs 295–300 a bag, a large divergence from markets in the North (Rs 225–230/bag in Rajasthan), (Rs 240-245/bag in New Delhi) and South (Rs 170-180/bag in Andhra Pradesh).

The gap is widening at a rapid rate and even after accounting for a freight cost of Rs 30–60/bag and a further Rs 20-30/bag as tax outgo, there is a clear opportunity for the North and South-based players to sell cement in the Central region.

This should contain prices in the region. According to analysts, the price disparity has given a clear edge to North-based players, especially JP Associates, Grasim and Shree Cement.

With buoyant demand and substantial price hike in the last two months, cement analysts expect North-based players to record stronger fourth quarter results than their southern counterparts.