L & T Push Forces Madras Cements To Cut Prices

Hard-sell by Larsen & Toubro (L&T), the countrys second-largest cement producer has started eating into the market share of India Cements Ltd (ICL) and Madras Cements Ltd (MCL), two of the largest South-based cement manufacturers forcing them to drop prices.

Cement analysts in Mumbai said L&Ts despatches from its Hirmi plant in Madhya Pradesh to the southern markets has increased supply, forcing Madras Cements to drop prices by Rs 10 per bag.

India Cements is likely to follow. Industry experts say prices could fall by a further Rs 25 per bag.

Industry sources said that prices for premium brands have already slid in Chennai from Rs 165 per bag to Rs 145 per bag, while for low segment brands, prices had dropped to Rs 140 per bag from Rs 150 per bag.

 

In Hyderabad, price per bag fell to Rs 105 from Rs 109 for premium brands.

Industry observers said after the commissioning of L&Ts Tadpatri plant, prices will fall further as demand in the region is not growing.

While cement consumption in southern region had stagnated at 1.66 mt, manufacturers expected the post-monsoon demand to be higher, but that did not happen, analysts added.

L&T despatches 70,000 tonne of cement south every month with Andhra Pradesh receiving the largest chunk of 30,000 tonne, followed by Tamil Nadu with 20,000 tonne and 8,000- 9,000 tonne for Kerala and Karnataka.

While ICL sells 47 per cent of its cement production in Tamil Nadu, MCL sells 49 per cent in that market. In Kerala, the figures for ICL are 31 per cent and that for MCL are 22 per cent.

Similarly, in Andhra Pradesh, ICL sells 9 per cent and MCL sells 24 per cent. In Karnataka, figures for ICL are 11 per cent and for MCL are 4 per cent. Sources say MCL will be the worst hit.

If L&T goes ahead with its plans to set up a bulk handling cement terminal in Mangalore, Karnataka, it will facilitate exports and reduce the pressure on the domestic market.