The Hindu Business Line : Cement prices in South likely to hold for now

Chennai, Oct. 3 Cement prices in the South are firm and are likely to hold for now. Normally, prices would drop at this time on slack demand due to rains and the start of the festival season.

But the situation is expected to change radically in November when demand picks up. There could be a tightening of supplies and buoyant prices, say industry sources.

For now, manufacturers say a tight supply position and healthy demand are helping to hold prices steady. Last month, prices dropped by Rs 2-3 in some cases but that has also stopped. Most manufacturers in the South have just a day’s worth of cement stocks, they say.

Apart from the demand, there is a drop in fly ash availability in the market because some of the thermal units have shut down. So the supply of fly ash for blending has dropped. Blended cement can contain up to 30 per cent of fly ash. This has also contributed to the tight supply of blended cement, they say.

Prices in the South range around Rs 248-250 a bag in Tamil Nadu, Kerala and Karnataka, and Rs 215-220 in Andhra Pradesh, and are not likely to change for now, they say.

According to industry sources, the demand in September and October continues to be good particularly in Andhra Pradesh and Tamil Nadu. Normally, in September the capacity utilisation is lower by about 15-20 per cent as compared to the earlier months. However, units in the South are still stretched to meet the demand.

The production capacity in these southern States is about 52 million tonnes — about a third of the country’s production capacity. But the production units are stretched and are unable to even take up preventive maintenance that is usual for the season. Capacity utilisation in Tamil Nadu and Andhra Pradesh, which account for about 80 per cent of the production in the South, is about 115 per cent, say manufacturers.

In Andhra Pradesh and Tamil Nadu, the demand is growing far ahead of the average 10 per cent for the country. According to analysts, Andhra Pradesh’s consumption in August grew year-on-year by more than 30 per cent and in Tamil Nadu by nearly 15 per cent. The demand is expected to pick up further from November and this could spell a further period of buoyant prices.