Cement prices in Andhra Pradesh have started heading north. After hitting a low of nearly Rs 200 a 50-kg bag in the retail market at the end of 2012, prices touched Rs 220-230 this week.

“The perceptible increase in demand is behind the price rise. We expect both demand and price to be on higher levels going forward,” Anjani Portland Cement Ltd CEO S.V.S. Shetty said. Government demand, too, has picked up with agencies such as State housing corporations releasing orders in the last couple of weeks, he added. Demand in the South is mostly up due to increase in construction, mainly in the housing sector, and general elections next year are also expected to boost demand, according to a functionary of Sagar Cement Ltd.

Construction activity has picked up slightly after the Sankranthi festival. With the best season for construction ahead, the cement industry is hopeful of both surge in production and hardening of prices, say industry sources. Subdued demand, sluggish realty market in Hyderabad and entry of several big players with high capacity, along with virtually no Government projects coming, kept prices low for several months last year. The worst phase turned out to be December, when prices crashed by nearly Rs 50-60 a bag. High power tariffs, power cuts and costlier diesel are also weighing on the industry to push up the prices. The coming months portend a steady price rise, industry experts felt.

The 40-odd plants in the State, both big and small, are optimistic, as construction activity has improved and Government contracts are being finalised in the last quarter of the present fiscal. Similarly, cement firms are trying their best to improve their performance in the last quarter, which could see “a more organised market dynamics in terms of prices,” say experts. Meanwhile, there is an undercurrent of consolidation in the market, with reports of acquisitions in the pipeline. The 40-plus cement firms have an installed capacity of over 55 million tonnes. Though, the average production utilisation was around 50-60 per cent last year, companies hope profits to rise.

somasekhar.m@thehindu.co.in

naga.gunturi@thehindu.co.in

(This article was published on January 26, 2013)
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