Cement prices continued their downward trajectory for yet another month in June, but this time at an accelerated pace. The slump is more evident in the southern markets, especially in Andhra Pradesh.
After a spurt in prices at the beginning of the year, cement prices pan India, barring Mumbai, have started declining since April due to lack of demand for the commodity. Interestingly, these price corrections have happened during the pre-monsoon period and with the monsoon setting in, chances of a further drop cannot be ruled out.
Cement majors, including UltraTech and ACC Ltd among others, had already hinted of prices to be under pressure in the coming days.
Cement prices in the Andhra Pradesh markets are currently hovering around Rs 150-155 per 50 Kg bag, down by Rs 50-60 per bag from its peak two months back. Cement prices in Chennai, too, have declined by Rs 15-20 per bag to Rs 230-240.
Dealers believe that prices in south India could fall further in the coming weeks as demand is showing no signs of revival. While prices in the central and the northern regions, particularly in Delhi, have remained flat, that in the western region of Pune have declined by 15-20 per bag.
According to a report by Religare Institutional Research, ?The Pune market in the western region is essentially correlated with the AP market as dispatches enter Maharashtra from AP. Prices in the Pune market have corrected by Rs 15-20 per bag in the last 15 days.? Dealers opine that prices could well go below Rs 200 per bag as monsoon sets in.
Says Amish Raja, a cement stockist in Amravati, ?Prices in the trade segment in the Vidharbh belt has fallen by Rs 5-10 so far. The prices have fallen much before monsoons due to the sluggish demand. Moreover, new cement players like Jaypee Cement, Murli Cement, Deccan Cement, Sagar Cement and Binani Cement are entering the Vidharbh region, thereby increasing the supply here. However, the demand is very sluggish and prices are expected to fall further by Rs 10-15 per bag during monsoons.?
For the Mumbai market, although prices have been steady at Rs 245-250 per bag, a decline is expected in the next 15-20 days, say dealers.
However, Vinod Juneja, MD of Binani Cement and member of Ficci?s governing council, is not worried over the falling prices. ?Prices will improve after the monsoons. Currently, a good monsoon is more important than falling cement prices,? he says.
Cement prices in Uttar Pradesh have remained flat at Rs 250 per bag, however, demand continues to be weak in this market. In the eastern region, especially in Kolkata, prices have declined by Rs 5 per bag and are currently at Rs 250-265 per bag.
UltraTech Cement, during its fourth quarter results, had already hinted of prices to be under pressure in coming days. ?Significant capacity addition during the year together with the possible addition of around 30 million tonne per annum during FY11 may lead to a surplus scenario. Capacity utilisation is expected to be around 80% and these factors are likely to put pressure on prices,? UltraTech said.