Cement prices may dip soon

June 29, 2009: Cement prices are expected to soften Rs 3 to 5 per 50-kg bag next month due to the twin effects of excess supply and lower demand, according to industry officials and dealers.

After this cut, retail cement prices would come down to Rs 255 in Mumbai, Gujarat, south India and around Rs 245 in the northern and eastern markets.

"A demand slowdown has set in June, which also saw new capacity," said Cement Manufacturers' Association (CMA) president and Shree Cement managing director H.M. Bangur. Ambuja Cements head (commercial and marketing) Ajay Kapur said, "We still expect healthy demand but prices could come under pressure by Rs 3 due to the monsoons and capacity additions in July-August."

Cement Stockists & Dealers Association president Sanjay Ladiwala said the slowing demand would further diminish in the next few weeks due to the monsoons. It might lead to more reduction in prices in August. It may be recalled that cement prices did not fall during the last two monsoons.

Bangur, who declined to comment on the expected price reduction in July, said the future movement of cement prices would depend on the government policy on infrastructure, to be unveiled in the budget on July 6. A senior official associated with a cement body said demand fell 6 percent in June and an additional capacity of 20 million tons (mt) was added this month. The supply will further go up by 30 mt in December.

Grasim, ACC and Ambuja Cement are expected to reduce prices on July 1. Top executives of Grasim and ACC declined to comment on the issue. Other cement companies, including Shree Cement, Dalmia Cement and Binani Cement, are contemplating price reduction, after the budget announcement.

Cement prices last came down in March, following a 2 percent cut in excise duties. But the prices started going upward from April. Over 70 cement companies produce nearly 220 mt a year. According to the Cement Manufacturers' Association, 110 mt of capacity will be added at investment of about Rs 50,000 crore in the next three years.

Source: The Economic Times