After touching their peaks in March 2011, cement prices come down by Rs5-Rs10/bag across India, while demand remains subdued
Moneylife Digital Team 12 April 2011

According to a recent research report, aggregate despatches for major cement players have gone up by 8.4% year-on-year in March. On a whole, industry despatches are expected to grow 5%-7%, but no uptick in demand is expected

On 22nd February, Moneylife had reported on how due to the imbalance in the demand-supply situation, prices of cement are likely to remain subdued over the long term (Cement manufacturers may be hit by soaring input costs, excess supply and depressed demand in the next fiscal ).

A number of industry analysts have warned that the industry suffers from excess capacity, and prices will continue to remain under pressure.

According to a survey released by Edelweiss yesterday, all-India cement prices (which are approximately Rs256/bag), have corrected by around Rs5-Rs10 across all regions. This survey was conducted across 29 Indian cities. The dealers polled in this survey have indicated that demand has been sluggish in southern India. Cement prices are expected to remain flat in this region. In two of the major metros in south India, Bengaluru and Chennai, prices have remained subdued. However, in Hyderabad, prices have marginally gone up by Rs5/bag. Small-scale manufacturers in Kochi have been undercutting prices by almost Rs30/bag.

Fitch Ratings, in a report released earlier this year, had echoed a similar sentiment, noting that "the south region with a large demand/supply gap, which is expected to widen further, is likely to witness particularly heavy pricing pressure, followed by the west and east regions." Fitch Ratings had said that the outlook for the Indian cement sector would be 'negative' to 'stable'.   

- Pricing pressure is being felt across the country. In the northern region, prices have dropped by Rs5-Rs13. Dealers also expect a further correction in prices, says the Edelweiss report. Demand has not taken off despite special discounts being offered (approximately Rs5/bag).

Due to the West Bengal State Assembly elections, demand will remain subdued. There has been a correction of approximately Rs5-Rs10/bag over the past few days. In fact, Edelweiss expects further pressure on cement prices.

In the western parts, Gujarat and Maharashtra are feeling the pricing heat. The survey says that prices in Ahmedabad have remained flat, but they are expected to correct by Rs5-Rs10 per bag. Apart from the state capital, dealers are expecting price correction across Maharashtra.

Central India is the worst hit. Prices have corrected by a steep Rs20/bag in Lucknow and Kanpur. The strike by the Builders' Association in Bhopal has also not helped the situation.

Major cement players (who account for more than 54% of all despatches) are ACC, Ambuja Cements, UltraTech, Shree Cement, Dalmia Cement, OCL and Jaiprakash Associates.    

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