Cement prices fall up to 10% in two months

Cement prices have witnessed the greatest fall of about 5-10 per cent across the country in the last two months. Moreover, in western and southern India, where a large amount of new stock is still arriving, the non-trade prices have been cut by 20-30 per cent to Rs 160-180 a bag.

The overall slowdown, both in domestic and exports demand, coupled with capacity addition, especially in states such as Gujarat, which produces about 20 per cent of country’s total cement, has started a battle in non-trade prices. For places that are close to manufacturing facilities, the prices (non-trade) have been raised to Rs 150-160 a bag by players such as Jaypee Cement and Sparta Cement.

 

Cement players in Andhra Pradesh have also slashed prices and are reaching out to other states, as infrastructure activities have been hit in the state due to floods.

“It is for the first time since 2005 that we have seen such a huge fall in prices. However, there is no room for further price cut, else companies will have to bear losses. There has been suspended growth and people have postponed purchases hoping that prices will fall further. From next month onwards, we expect a revival in demand leading to a rise in prices,” said Alok Sanghi, director of Sanghi Cement.

According to Sanghi, Andhra and Karnataka have seen maximum capacity additions in recent times which have led to 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. Industry sources, meanwhile, pointed out that Andhra players are trying to push cement into the western Indian market and are quoting a price lower than the current price to gain market share.

Vinita Singhania, managing director of J K Lakshmi Cement and president of Cement Manufacturers Association (CMA) said, “Material from Gujarat usually flows into the Maharashtra market, but now supply from south is also flowing into the Mumbai market.”

Sources also explained that capacities that have been commissioned sometime around last financial year and had been operating at 48-50 per cent utilisation till now, are now stabilising and has led to an oversupply of cement in the market.

The total capacity of the country is about 220 mtpa and by 2012, it is likely to rise to 298 mtpa.

H M Bangur, managing director of Shree Cement informed that around 30 million tonnes (MT) capacity has already come on-stream this year and the trend is likely to continue for the next three years with around 30 MT capacity getting added every year.