Cement prices in Mumbai is headed southwards despite any pulls from the neighbouring state. In fact, the prices in Gujarat, which is generally Rs 10-15 per bag lower than that in Mumbai, have shown marked improvement in recent weeks to consolidate at around Rs 126-128 per bag.

On the contrary, prices in Mumbai have dropped sharply to Rs 128-132 per bag, which is almost Rs 20-25 per bag lower than the corresponding period last year. With the monsoons expected to set in soon, cement makers in the city are desperately exploring the option of hiking the prices at this stage to ensure that the rains to not augment their misery further.

"We are weighing the option of hiking prices by Rs 5-10 per bag very shortly. All major cement makers are concerned as the current price situation hit everybody badly," said an ACC official.

Gujarat Ambuja Cements, which along with Larsen & Toubro, account for the largest cement pie in the western region, is also confident that a price hike is round the corner. "There are positive indications that prices will soon start moving northwards," said a GACL official.

With prices in Gujarat and Mumbai hovering at similar levels, dumping from the neighbouring state which had reached alarming proportions in recent months, has ceased to be a matter of concern for the local players.

Analysts point out that the steady prices in Gujarat is not due to a surge in demand. "Local players have come together to prop up the prices in Gujarat. The arrangement seems to be working well," said an analyst. Smaller players from Gujarat, which have been responsible for the large-scale dumping, no longer find it remunerative to export cement to the city.

"Thus while Mumbai prices continue to dip, dumping from the neighbouring state is no longer responsible for the menace," said an industry observer."The decline in cement prices has been quite unprecedented. Our main worry is that the price depression has come at this time of the year when the realisations are generally quite high. Unless producers get together to fight this menace, most will have to take big hits in their bottomlines," said the marketing head of a cement company.

Points out an L&T official: "With over 40 million tonnes of cement capacity up for grabs, many of the smaller producers are operating at very high capacity to draw the attention of potential buyers. The market demand is not what dictates supply these days and prices have, in effect, taken a severe beating."

Producers are worried that without a reversal in prices at this juncture, their fortunes might dip further once the monsoon finally sets in. "Prices of cement are generally depressed during the monsoon. Unless things improve now, the fall in prices may be much steeper this time," said a senior industry official. Industry watchers feel that if the price trend continues many smaller players will have to close their plants.

"At the ruling prices, many operators are selling below their variable cost. Unless the situation improves, these companies will find it difficult to stay afloat," said an industry analyst.