Cement prices in Andhra Pradesh, in particular, and southern markets, in general, continue to be on the lower side due to increased supply and slow pick-up in demand.
The price range of cement now is between Rs 135 and Rs 160 a bag (ex-godown).
“The price now is lower than the break-even price. I see this as result of increased supply,” Mr Srikant Reddy, Executive Director, Sagar Cements Ltd, told Business Line.
‘Cyclical'
“Not only in Andhra Pradesh, entire southern markets are down. I see this as cyclical in nature due to demand-supply dynamics. For the next 12-18 months, there is going to be pressure on the industry,” he added.
The recent increase in inputs' prices, including fuel, was also an additional burden on the industry, Mr Reddy said.
According to a senior functionary of Bheema Cements Ltd, the price was on the lower side two weeks ago and has picked up a little now. “However, the price range is unviable for industry,” he said.
In September-October 2009, prices had hit a low at the Rs 125-135 band, which marked a decline of over 20 per cent compared with the previous year.
Downward spiral
Though the price recovered to the over Rs 165-185 range later, the downward spiral began again in May 2010, according to industry sources.
The reasons include capacity additions and the onset of monsoon, which slowed the demand.
In Andhra Pradesh — the largest market for cement in the country — the monthly despatches are at about 20 million tonnes (mt).
According to industry estimates, about 55 mt of new capacity could be added in the country, during the current financial year.
Total demand
The total demand in the country is pegged at 198 mt, against capacity estimates of 250 mt.
This accounts for over 20 per cent of the installed capacity of 2009-10. During last year, 42 mt of capacity was added.
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