The Hindu Business Line : Cement prices continue to rule high in South

Mumbai, Aug. 2 Cement prices continue to rule high in the southern States despite the rains, especially in Tamil Nadu where it has gone up by over Rs 10 per bag of 50 kg in the first quarter.

The western region (excluding Mumbai), and the eastern and northern regions reported a minuscule dip.

The firm cement prices in the South augurs well for South-based companies such as Madras Cements, India Cements and Dalmia Cements.

“As Madras Cement sells close to 70 per cent of its produce in Tamil Nadu and Karnataka, it will benefit,” said Mr Ajit Motwani, Research Analyst, Emkay Stock Broking.

“Consequently, we are upgrading our earnings estimates for the company by nine per cent for the current fiscal and six per cent for the next.”

He added: “We remain fairly confident of the demand-supply equation in the South region.”

According to an Emkay Stock Broking research report, cement prices moved up by Rs 10-12 a bag in Tamil Nadu and Rs 10 in Karnataka over the last 2-3 months.

Prices in Chennai rose by Rs 6 in May and Rs 3 each in June and July; cement currently sells at Rs 238 a bag.

Demand in the South, especially Tamil Nadu, is expected to be stronger in the coming months, which may pave the way for another hike, said a dealer.

In Karnataka, cement costs Rs 230 a bag, up by nearly Rs 10.

In May, the Government removed dual excise duty and introduced an ad valorem duty of 12 per cent on cement sold above Rs 190 a bag.

Post-changes, prices in Mumbai remained stable at an all-time high of Rs 250, whereas in Ahmedabad it declined by Re 1 in May to stabilise at Rs 222.

Prices in Jaipur fell Rs 6-10 in May to stabilise at Rs 205.

A major reason for the sharp fall was annual capacity addition of 2.25 million tonnes by Binani Cement in Rajasthan.

Prices in Delhi have remained at Rs 222, while in Kolkata (East) they have dipped by Rs 5 to Rs 225.

“In Delhi, prices dropped by Rs 2 in May, but due to higher freight (overloading issue) they again rose by Rs 2. Demand remains subdued and a lag in supply is holding prices at the current level,” said ASK Securities.

Despite the Government relaxing import norms, import has not taken off as BIS norms are mandatory for sale in the country.