The Hindu Business Line : Cement prices inch up across markets

On the ground
Key markets facing price hikes of over Rs 5.
Firms say trend is in sync with commodity price rises.
Location may contribute to future price trends.

Anil Sasi

New Delhi, Feb. 9 After steel, it’s the turn of cement manufactures to jack-up prices. Cement prices are now inching up across most markets, the first round of widespread ramping-up of prices following a self-imposed moratorium agreed to by cement manufacturers last March.

While South-based cement manufacturers were the first to increase prices, the trend is pretty much catching up in the Northern and the Western markets as the demand-supply mismatch continues across the country.

According to industry players, price increases of up to Rs 10 per 50-kg bags are being witnessed across some regions, with further escalations predicted during the course of the year as no major capacities are expected to come up until the end of calendar year 2008.

TN condition

Industry players said a favourable demand-supply situation in the South enabled cement firms to kick-start price increases. In Tamil Nadu, the State Government has already stepped in to ask manufacturers to rein-in prices. There are reports of price increases of around Rs 5 per bag across Uttar Pradesh and Maharashtra, with key market such as Mumbai already facing price hikes of over Rs 5.

Cement firms contend that the price rise is in sync with increasing commodity prices, with steel prices having already been hiked by 10 per cent recently. “Demand for cement is expected to grow faster than supply with rapid infrastructure development and real estate projects taking off across most towns and cities, leading to firmer prices,” a Delhi-based analyst said.

Demand centres

Also, a mismatch in the location of key demand centres and upcoming production facilities could contribute to the price trends going forward. While the Northern region led the growth in cement production last year, the West topped the consumption list, accounting for around 16 per cent, followed by the South and North zones with 11 per cent each. This trend is likely to be seen during 2008 as well.

Further, even if the supply situation were to catch up with demand by 2009-10 (as per projections), Southern markets, including Tamil Nadu and Kerala, are expected to be partly insulated from a correction because of their large distance from the North, where surplus capacities are first expected.

The Western region, which could have serviced some Southern markets, is expected to be in deficit for at least the next three years, according to analysts.

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