Despite good demand and infrastructure spend announced by the government, cement prices in some parts of the country have fallen drastically, a whopping decline of almost Rs 60 per 50-kg bag. Due to fall in demand, Andhra Pradesh has been the worst hit where the prices have reached the April 2006 levels. This is more than the normal fall in cement prices during the monsoon.

A bag of cement in Andhra Pradesh is currently sold in the range of Rs 155 to 185 (peak price per 50 kg bag), compared to the peak price of Rs 220-245 per bag in April 2009. Meanwhile, prices in Karnataka have dropped to Rs 190 per bag.

According to a recent report from IIFL, continued poor demand and increased supplies have depressed cement prices in the southern parts of the country. Prices in the East were depressed on account of increased supplies from the South and due to the monsoon.

However, cement players in southern India consider the low infrastructure spend and fall in individual spend to be the reason for fall in cement prices.

Agreeing to the drastic fall in prices, S Sreekanth Reddy, ex-director, Sagar Cement told FE, “The prices have dipped by more than Rs 40 per bag, which is more than the usual drop of Rs 10-15 per bag during monsoon. Apart from the fall in demand during the monsoon, the assembly elections in Andhra Pradesh, and other unfortunate eventualities led to a shut down of the markets, which resulted in accumulation of inventories. Also, the off take was not as per expected,” he adds.

A Dalmia Cement spokesperson also agreed to the fall in prices in Andhra Pradesh, which according to him, is currently about Rs 170-175 per bag.

“The state government spending is close to nothing currently. However, I don’t see the price fall to be quite drastic further. Once the infrastructure and public spending increases, cement prices are expected to be back to their peak levels,” said Dalmia Cements spokesperson.

Meanwhile, the rest of the country has witnessed a price cut of Rs 10-15 per bag and producers are giving discounts of Rs 5-10 per bag, on account of slackening demand due to the monsoon, say cement dealers.

“The price of branded cement in Mumbai is more than Rs 255 per bag and non-branded cement is about Rs 240 per bag. A further fall of Rs 5-7 per bag is also a possibility,” said a Mumbai-based cement stockist requesting anonymity.

On the other hand, cement manufacturers are hopeful of the prices picking up pan India, after Diwali. According to Reddy, prices are expected to increase by Rs 10-20 per bag in the next few months. However, a drastic jump in prices in the South is not expected.