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Hopes of revival in cement prices ahead of monsoon were washed out with top dealers reporting a decline of Rs 5-10 for a 50-kg bag across regions during the last fortnight, as there was no turnaround in demand either from infrastructure or real-estate sectors.
Cement companies in their race to hold market share have pushed their wares by offering special discounts to big dealers and created a glut in the market, resulting in the current drop in prices, said a dealer.
The western region, including Maharashtra, Gujarat and Goa which were holding strong till recently, have started cracking. Prices in Mumbai were down Rs 5 a bag while Gujarat witnessed a drop of Rs 10-15 a bag due to weak demand ahead of monsoon. Though the average price in the western region at Rs 265 a bag in the June quarter may work out to lower by about Rs 11 a bag sequentially, they may still end up about Rs 17 year-on-year, said Mr Ajit Motwani, Research Analayst, Emkay Global Financial Services.
The average cement prices in the northern region were down Rs 14 a bag to Rs 275 owing to sharp fall in demand. The June quarter prices in the region are still up Rs 10 a bag compared to last fiscal.
“Though cement prices are higher compared to last year, a clear trend on the cement companies' profitability will emerge only after factoring in their production numbers. They had incurred a huge cost push due to rise in raw material prices and interest cost has also gone up substantially in last one year,” said an analyst.
Reflecting the sustained weakness in the southern region, cement prices in Hyderabad dipped by Rs 10-15 a bag. However average price of Rs 280 in the region was down just Rs 3 a bag sequentially. Demand failed to revive after the Assembly elections. Shortage of labour hampered construction in the eastern region, thus pulling down cement prices by Rs 6-15 a bag to Rs 242.
Prices in the central region were down 27 a bag to Rs 245 sequentially.
The region saw a price drop of Rs 5-15 a bag. However, dealers in this region suggest that prices might have bottomed out with lesser chances of any further price cuts.
Shares of cement companies on Tuesday were mixed. ACC gained 0.41 per cent at Rs 1,009 and UltraTech 2.67 per cent at Rs 1,049. Ambuja Cements was down 0.81 per cent to Rs 134.90 and Jaiprakash Associates 0.06 per cent to Rs 84.20 on BSE.
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