Bulk cement prices slide as new capacity boosts supply
A string of new capacities, which came onstream in recent months, has started impacting cement prices.
By Sanjeev Choudhary, ET Bureau |
NEW DELHI: A string of new capacities, which came onstream in recent months, has started impacting cement prices. Prices of bulk cement ��� bought by construction companies in large quantities directly from cement makers ��� have come down by at least Rs 100 per tonne.
���There is surplus cement in the market leading to a decline in bulk cement rates,��� says Shree Cement MD and Cement Manufacturers Association president HM Bangur. Bulk cement constitutes around 30% of Shree Cement sales. The contribution of bulk cement in overall sales for other cement makers varies between 10-50%.
The cement industry added around 20 million tonne of capacity in the first half of calendar year 2008, leading to a demand-supply mismatch. The industry���s installed capacity is around 203 million tonne per annum currently. Bulk cement usually comes at around 10% discount to retail cement, as the former doesn���t incur additional cost of packaging, warehousing and dealers��� margins. Says a DLF executive, ���We have seen a decline of around Rs 100-200 per tonne in prices in the past six months.��� He says the company also imports cement from Pakistan and Sri Lanka at a cheaper rate and uses the threat of import to extract a favourable price from domestic cement makers.
The government had waived all duties on the import of cement last year in order to check rising domestic cement prices, much to the dislike of domestic cement makers. Following the new capacity additions, cement makers are now demanding a roll back of import incentives. ���We don���t need import of cement anymore,��� says JK Cement group executive president RG Bagla.
With the Indian economy slowing down, the consumption of cement has also fallen. Cement production grew 8% last year to 168 million tonne. The growth in the first quarter of current fiscal has declined to 6% and industry leaders and analysts feel the growth for the full year 2008-09 will remain around 6%.
���There is a distinct slowdown in construction activity forcing cement makers to lower rates,��� says cement analyst Rupesh Sankhe. Retail cement rates, however, haven���t come down. ���There is inflationary pressure and the cost of transportation as well as dealers��� margins have gone up keeping retail prices intact,��� says Mr Bangur of Shree Cement. But analysts feel retail prices too may see a decline soon.
���There is surplus cement in the market leading to a decline in bulk cement rates,��� says Shree Cement MD and Cement Manufacturers Association president HM Bangur. Bulk cement constitutes around 30% of Shree Cement sales. The contribution of bulk cement in overall sales for other cement makers varies between 10-50%.
The cement industry added around 20 million tonne of capacity in the first half of calendar year 2008, leading to a demand-supply mismatch. The industry���s installed capacity is around 203 million tonne per annum currently. Bulk cement usually comes at around 10% discount to retail cement, as the former doesn���t incur additional cost of packaging, warehousing and dealers��� margins. Says a DLF executive, ���We have seen a decline of around Rs 100-200 per tonne in prices in the past six months.��� He says the company also imports cement from Pakistan and Sri Lanka at a cheaper rate and uses the threat of import to extract a favourable price from domestic cement makers.
The government had waived all duties on the import of cement last year in order to check rising domestic cement prices, much to the dislike of domestic cement makers. Following the new capacity additions, cement makers are now demanding a roll back of import incentives. ���We don���t need import of cement anymore,��� says JK Cement group executive president RG Bagla.
With the Indian economy slowing down, the consumption of cement has also fallen. Cement production grew 8% last year to 168 million tonne. The growth in the first quarter of current fiscal has declined to 6% and industry leaders and analysts feel the growth for the full year 2008-09 will remain around 6%.
���There is a distinct slowdown in construction activity forcing cement makers to lower rates,��� says cement analyst Rupesh Sankhe. Retail cement rates, however, haven���t come down. ���There is inflationary pressure and the cost of transportation as well as dealers��� margins have gone up keeping retail prices intact,��� says Mr Bangur of Shree Cement. But analysts feel retail prices too may see a decline soon.
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