Price hikes halt cement demand recovery

Suresh P. Iyengar Mumbai | Updated on February 22, 2012


Most companies report marginal growth in January sales

Rise in cement prices seems to have put pressure on demand in February and slowed down the process of recovery seen last month.

Most cement companies reported a marginal sales growth in January compared with December, except for Ambuja Cement, which reported a fall in sales even after tightening its production.

Average cement prices have gone up by 17 per cent to Rs 283 in January from Rs 242 in the same period last year.

“Cement sales have slowed down in last fortnight due to lower off-take by real estate and infrastructure companies,” said a cement dealer.


The industry cement dispatches in January were up three per cent at 16.27 million tonnes (mt) against 15.76 mt in December.

It was up 10 per cent year-on-year, largely due to a lower base last year. Production also grew five per cent to 16.47 mt from 15.72 mt in December, while output jumped 11 per cent compared with the same period last year.

In the first 10 months of this fiscal, cement production and sales grew by six per cent each to 144 mt (136 mt) and 145 mt (137 mt). Capacity utilisation fell to 73 per cent this fiscal from 77 per cent in the same period last year. Cement companies, which added huge capacity in last one year, had to trim output to align with the slowing demand, leading to lower capacity utilisation.


“With market absorbing the price hikes implemented in November and December, most cement companies were ramping up production leading to excess supply in certain pockets,” said a cement company official.

Coal India decision to de-link rates from international price parity till March has come as big relief for cement companies that have been hit by steep cost escalation. The move has resulted in lower prices of certain coal grades. The price reduction will take retrospective effect from January 1 and CIL will review the pricing system after March 31.

“Though Coal India has decided to cut prices till March, it has not yet called off plans to implement the new pricing policy, which will push up prices by 5-12 per cent for different grades of coal. Under the new plan, users will be charged based on the gross calorific value of coal against the present practice of useful heat value,” he added.

Published on February 22, 2012

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