It is a development that will certainly impact the construction and infrastructure sectors-both bulwarks of the government?s economic revival programme. Belying expectations of a further decline, cement prices in parts of the country were increased by between Rs 3 and Rs 4 for a 50-kg bag from Tuesday.
Confirming the increase, cement dealers in Mumbai said that the price of cement supplied by major producers such as Ambuja Cement, ACC, Ultratech, Grasim and Binani, among others, have gone up. Dealers said it was the supply shortage that was driving up prices.
?Demand is still low, but we have not received any cement supplies for the last eight days from the manufacturers. Companies have asked us to increase the price by Rs 3 from Tuesday onward,? said a Mumbai-based dealer on condition of anonymity. Other dealers with whom FE spoke with also confirmed the price hike and the shortage in supply of the commodity in key markets like Mumbai.
Manufacturers seem to have taken the decision to raise prices after cement despatches shot up in January. Despatches from ACC, Aditya Birla and Ambuja Cement grew 12.5%, 7.35% and 4.84%, respectively. JK Lakshmi reported a 22% growth in despatches last month. But this high growth might be only a statistical blip, and attributed to the low base in January last year, say industry observers.
After the price hike, cement prices in Mumbai will range from Rs 232 to Rs 254 for every 50-kg bag. In north India, prices are in the region of Rs 190-Rs 220 a bag, in the south Rs 210-265 and in the east, between Rs 200 and Rs 230.
Explaining the rationale behind the hike in prices, J Datta Gupta, chief commercial officer at ACC Ltd, told FE, ?We have increased cement prices by Rs 4-5 per bag in Uttar Pradesh and Madhya Pradesh on account of the good demand. The slowdown in demand had forced the prices to dip in the months of November and December last year.?
Vinod Juneja, managing director of Binani Cement, echoed that explanation, saying, ?We have increased our prices in Mumbai as we are witnessing good demand from the real estate sector, especially from January onwards.? UltraTech and Ambuja Cement could not be contacted for a response.
According to industry observers, transportation bottlenecks could also have contributed to the supply shortage. ?The shortage in supply could be because of the unavailability of railway rakes, as this is the harvest season and railways divert rakes for agricultural needs,? said one analyst.
Says Shailendra Chouksey, whole-time director, JK Lakshmi Cement, ?The demand has been good in the month of January this year. Moreover, the current quarter is expected to have a good demand in the backdrop of rising infrastructure activity.?