Higher supplies to drag cement rates

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Close to a month after the government banned cement exports, cement prices have started their gradual decline. With Gujarat witnessing a fall in prices by Rs 5-10 per bag, the cascading effect will be felt in Mumbai soon. According to industry sources, manufacturers in Gujarat are planning to divert the supply to Mumbai, pushing down prices. These supplies will hit the Mumbai markets next week, say sources.

“Cement supplies are facing delays related to transport. However, we will see the consignments coming in by next week,” revealed a source on the condition of anonymity.

Mumbai has witnessed a 12% increase in cement supply in the current year, from 6.50 lakh tonne per month on an average last year to 7.25 lakh tonne this year, along with 50,000 lakh to 60,000 lakh tonne being imported into the city as well. With the additional supply from Gujarat getting diverted to Mumbai, prices are likely to dip by Rs 3 to Rs 5 per bag in the third or fourth week this month, say experts. Cement prices in Mumbai currently stands between Rs 249 to Rs 260 per bag at the billing rate.

“The ban on exports was likely to hit the western market significantly. Going forward, we are expecting cement prices to fall by 10% in the next 12-18 months, pan India,” said Hitesh Agrawal, head research, Angel Broking.

In a recent report, Credit Suisse has said 99% of cement exports out of India are made from the western region. Due to high freight costs, the price impact from this action, if any, should be restricted to the west. The ban on exports may, however, serve to marginally increase freight costs for exporters. The report further said that increased supply of cement in India and lower supply to the Middle East may result in Pakistani exporters re-routing despatches there.