The Hindu Business Line : Cement prices rise slowly but steadily

CEMENT prices have moved up considerably in the South, are increasing at a `snail's pace' in the North, ruling steady in the East and sliding in the West.Overall, the general direction is upward and the pace of the rise slow, indicating that fundamentals are behind the rise rather than any artificial situation, according to analysts, company officials and dealers.

"We see prices culminating at Rs 170 to Rs 175 per bag in Mumbai by March next year, from the current price levels of around Rs 150," said a large cement dealer in the city.

"The too-slow-but-steady rise is good, it means the rise is one that is based on fundamentals rather than an `organised' rise," said a senior industry official. Capacity utilisation in the industry has also gone up in general, from 80 per cent last year to 82 per cent now," said Mr G. Ravishankar, CEO, Crisil Research & Information Services Ltd. "We should see demand go up during the second half of the year, for the monsoon has been good and therefore rural incomes, too. It has not yet picked up because the extended monsoon delayed construction activities."

Even in the South, where the general perception is that the price rise of Rs 30 per bag over the last month or two is an `organised' one, analysts feel the current prices are not unreasonable.

"The prices had been kept low, at Rs 130-plus levels because of the dual taxation in the State; now the manufacturers look as though they have decided to up prices, but it is a decision to sell at normal price levels from unreasonably low levels," said a dealer. "It is not unreasonable because there has been no resistance from the market."

The additional production from Sanghi Cements has of course, dragged down the Gujarat market, where prices are as low as Rs 100/110 per bag, said dealers.

Its proximity to the Mumbai and other Maharashtra markets has dragged down these markets by Rs 6 to Rs 8 per bag.

Since there are no greenfield capacities coming up, supply would get tighter with time, and the 18-month outlook is very positive indeed, Mr Ravishankar said.

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