Cement prices that have been rising since September after a sluggish run during monsoon may increase by another Rs.10 per 50-kg bag across India barring southern region, as manufacturers exercise production discipline and reduce utilisation levels, according to industry insiders.
Cement prices in the northern and the western regions have increased by Rs.5 to Rs.10 per 50-kg bag in this month. The wholesale prices in the northern region are now close to Rs.280-290 per bag while for the western region they are Rs.270- 280.
Sources said prices were first increased in the western region by Rs.5-10 per bag earlier this month followed by the northern region on Tuesday. Prices in the eastern and southern region remain stable.
Post the recent hike, prices have now reached a similar level across regions.
“We expect a further hike across regions, except the South. This could be to the effect of Rs.10 per-bag,” said an analyst from a domestic brokerage firm who did not wish to be named. The analyst, however, cautioned that price hike does not necessarily indicate there has been a demand uptick.
“The hike is not linked to growth or increase in demand,” he said.
The analyst expects a southern region-like situation panning out across other regions. Post a free-fall in prices a year ago, cement players in the southern region have been able to hold prices at a high level of Rs.260-270 per bag for the past few months. Industry sources do not expect any price change in this region until January.
This price stability has been brought in through reduction in utilisation level and thus production discipline. Most expect cement manufacturers in other regions will follow suit to maintain cement prices at a certain level through a similar production discipline.
Cement prices in most of the regions had started a downward trend since April as the industry entered a weak quarter period during the monsoon. Post this decline, cement firms took the price hikes of Rs.7-12 in September, depending on the region.
An industry source said, “The market has responded well to the first hike that we witnessed in September. We need to now see if this hike is equally accepted.” In two months, the industry has witnessed close to five to six rounds of price hikes. Based on recent channel checks, analysts expect the price rise to continue till the end of the strong season period.
Also, with input cost not expected to rise further, price-hikes are expected to shore up cement companies’ margins.
Meanwhile, the September quarter proved to be a weak one for cement companies, with prices touching a low of Rs.120 to Rs.170 per bag in some regions. The positive effect of rise in cement prices, with stable input costs, is expected to reflect in the March quarter of the current fiscal.
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