The high and low of cement price

The price of cement totally depends on its demand and supply. Where consistent demand for cement persists, the prices are high. The rates gradually increase in that particular region where infrastructure development is taking place. The total demand for cement rises by 8 per cent/annum. Every year price realisations of cement, from October to May, are at higher side and during the monsoon season, from June to September, they are low. This is a seasonal phenomenon of demand and supply, and it differs from region to region. There are also regional variations in cement prices. In Maharashtra, from October 2004 to May 2005 average cement price was Rs 170-175, in the south it was between Rs 150 and Rs 160, in the east between Rs 150 and Rs 160, and in the north between Rs 155 and Rs 160. For Grade A cement, this year there is Rs 4 to Rs 5 price increase compared to last year. This trend is exhibited in the north, west and east. But, for the cement Grade in the south prices scaled down by Rs 2 to Rs 3 compared to last year. On the other hand, for the same grade, in Central India like MP and UP prices are virtually flat. The prices have remained firm this year, according to Sanjay Ladiwala, President, Cement Stockists and Dealers Association of Bombay. Overall, during April-July 2005, in the current fiscal the YoY rise in WPI works out to around 7 per cent, which has come in the face of a double-digit increase in production. Currently, the maximum demand for cement is in the north due to many infrastructure projects. The second highest demand exists in the western region, especially in Mumbai-Pune, as well as in the eastern region. In Mumbai and Thane, the octroi adds up to the cement price. In Maharashtra, the prices are slightly higher because of 12.5 per cent VAT and infrastructure projects. In south, there is slow down in the demand (decrease in the cement price). However, in Andhra prices stood lower at Rs 130 per bag due to excess supply. But because of the latest industrial policy 2005-06, infrastructure construction activities will go up, and the demand will increase, according to Hari Narayan Vyas, dealer of Neha Marketing. In central India prices have ruled firm.Because of infrastructure projects, which are in the pipeline, the cement industry can expect an increase in price. But, next year onwards on an average the price of the cement may increase by Rs 4 to 5 per year. The main reason for the price rise will be supply shortage even though companies like Sanghi Cements, Shree Cements and Dalmia Cements are opting for capacity expansion and many new companies like Anjan Cement Ltd are setting up cement plants. "But increasing supply by a few million tonnes will not do good for the industry," says Sanjay Ladiwala. Similarly, for Grade A cement, Rs 4 to 5 increase will be observed on a YoY basis across all the regions. However, no sharp increase or decrease in prices is expected till 2008. South will also exhibit a similar trend but at the same time prices will be governed by the implementation of VAT.

Source: Madhu Chittora