INDIA: Cement becomes dearer in Maharashtra, North may follow suit

Cement makers today increased the price of the commodity in Maharashtra by Rs10 per 50 kg bag in the wake of a spike in demand.

Industry officials feel the rise in price would soon be reflected in the northern market though similar chances are remote in southern and eastern markets.

“Cement prices in Mumbai and Maharashtra have increased by an average of Rs10 per bag.... The northern region may follow suit soon, but it has not effected any hike,” an industry official said.

Cement price in the retail market is now around Rs250 per bag in Mumbai, Rs210 in Delhi, Rs255 in Chennai and Rs240 in Kolkata.

While the southern market is already ruling high, despite over-capacity, there is no apparent reason for the prices to go up in the eastern region, the official said.

Confirming the development, north India’s leading player, Shree Cements, today said it had not effected any rise in prices, but strongly felt that prices should go up in the coming days.

“We have not increased the price. Nor anybody I know in the sector in north India has done so.... But I strongly feel the cement price should go up in the market, as cement makers are bleeding in view of the rising raw material costs,” he said.

Input costs like coal have become dearer in recent times, escalating pressure on the cost of production. Coal price has gone up to $225 per tonne from $210 per tonne a quarter earlier.

The price of cement, like any other commodity, mainly depends upon the prevailing demand-supply dynamics and input costs.

Since cement is largely a regional commodity, the price differs from region to region.

The consumption of cement and its demand relies on the pace of construction activity, which remains subdued during the monsoon and gets momentum after the monsoon period is over.

As the south-west monsoon was a prolonged one this year, it impacted construction activity.

However, despite an increase in prices, margins of cement companies are likely to remain under pressure, as the sector is expected to run on an oversupply situation, thanks to huge capacity addition by the almost all players.

India produced 247 million tonnes (mt) cement in 2009-10 and is expected to add 29 mt in 2010-11, 24 mt in 2011-12 and 17 mt in 20102-13, according to a report by Elara Capital.

While, the industry is expected to add 71 mt between 2010-11 and 2012-13, the demand is expected to increase by 63 mt in the same period, it said.