Cement prices up by Rs 10-12 per bag

Cement prices up by Rs 10-12 per bag

"Post-Budget, cement companies hiked prices by Rs 10-12 per bag depending on the region, to pass on the increase in input costs," Angel Commodities Analyst, Rupesh Sankhe, said in a report.

The increase in excise duty on cement in the Union budget is likely to have an impact of Rs3 per bag for cement sold at below Rs 190 and a minimum Rs 3.75 for cement sold at above Rs 190.

Contrary to expectations of a substantial price fall due to significant capacity additions, cement prices ruled high during February. Prices were high in most parts of the country on account of strong demand and also due to constraints faced in transportation.

Prices were up in the northern region by six per cent, while prices which were at low levels in the southern region, rebounded in February post-improvement in the political scenario in Andhra Pradesh, Sankhe said.

The Indian cement industry posted a moderate 4.3 per cent YoY growth in dispatches in February, riding on healthy demand from the central and western regions.

Cement dispatches were up by an impressive 13.9 per cent and 8.5 per cent in the central and western regions respectively.

The southern region remained a laggard reporting one per cent decline in dispatches on account of production cut.

The all-India capacity utilisation for February stood at 83 per cent (92 per cent), down by a substantial 900 bps on a YoY basis. The decline was highest in the southern region, which recorded an utilisation of 69 per cent (88 per cent).

The central region, however, registered a phenomenal 107 per cent (97 per cent) capacity utilisation buoyed by strong demand arising from the infrastructure and real estate segments, Sankhe said.

On the industry outlook, Angel Commodities Analyst, V Srinivasan, said, "Indian cement companies have been reporting strong volume sales since the past few months. The additional capacity that has come on-stream has enabled most of the cement manufacturers to increase the total cement production."

Various measures introduced in the Budget to stimulate rural growth in infrastructure and increased allocation to different infrastructure projects are expected to sustain demand.

"We expect prices to remain firm till May on account of the demand arising from the Commonwealth Games, infrastructure spending and recovery in the urban housing segment. However, we expect correction in prices from June 2010, as new capacity addition over the last few months is expected to exert pressure and the ending of peak construction period," Srinivasan said.

"We believe that the north-based players will do well compared to south-based ones on account of the relatively balanced demand-supply dynamics," he added.

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