INDIA: Cement prices to rule firm in fiscal 2013

Cement prices are expected to rule firm in the coming months due to rising input costs and manufacturing expenses, according to the Centre for Monitoring Indian Economy (CMIE).

"(Cement) prices are likely to remain high in the coming months. The growth is expected to moderate as the base effect sets in. Prices are expected to recover and rise by 6.4 per cent in FY'12, after falling in the previous year," the think- tank said in its monthly review. The prices are expected to average 3.8 per cent higher in FY'13, it said.

During the third quarter of FY 2012, power and fuel cost rose by 10.7 per cent year-on-year (y-o-y) due to twin effects of higher coal prices (both domestic and imports) and cheaper rupee against the dollar.

Freight costs were also higher by 12.5 per cent y-o-y due to increase in diesel costs and surcharge levied by Railways.

The cement price in Mumbai, one of the largest markets, shot up by Rs. 42 per 50 kg bag, from Rs. 248 in January 2011 to Rs. 290 in January 2012.

The average price of cement bag was Rs. 292 in January 2012, CMIE said. Meanwhile, the demand of cement is expected to improve in the coming months and growth in despatches is likely to be modest at around 4 per cent during March 2012 quarter, the research outfit added.

Leading cement producer ACC Ltd said its production for February 2012 stood at 2.14 MTPA as against 1.97 MTPA in the corresponding period in 2011.

The despatches increased from 2 MT in February 2011 to 2.15 MT last month. Ambuja Cements' output shot up from 17.91 lakh tonnes in February 2011 to 19.93 lakh tonnes in February 2012. The despatches rose from 17.74 lakh tonnes in February 2011 to 20 lakh tonnes in February 2012.

Cement production of Aditya Birla Group-owned UltraTech moved up by 3.02 per cent at 357.28 lakh tonnes for the period April-February FY'12 as against 346.82 lakh tonnes during April-February FY'11.

The company's despatches moved up by 3.2 per cent at 357.41 lakh tonnes in April-February 12 vis-a-vis 346.33 lakh tonnes in the corresponding period last fiscal.

Cement output of UltraTech for February 12 stood higher by 4.96 per cent at 34.68 lakh tonnes and despatches at 35.17 lakh tonnes, up 5.67 per cent over February 11.

The cement industry expansion is set to moderate, with only 31 MTPA of capacity expected to be added this fiscal, much lower than 55 MTPA added in 2010-11, CMIE said.

However, a slowdown in demand has become a bigger concern, Angel Broking analyst Sourabh Taparia said.