Cement cos set to raise price as demand picks up

MUMBAI: Armed with an improved demand as well as despatches, cement makers will shortly hike prices by Rs 5 per 50 kg bag in a couple of weeks across the country, said dealers in Mumbai and Gujarat. The proposed price hike is in addition to the Rs 2 per bag increase in eastern India from February 1.

While mid-sized companies, like Binani Cement, JK Lakshmi, Shree Cement, have sent feelers to the dealers on an imminent price hike, major players, such as ACC, Ambuja Cements, Grasim Industries, are contemplating the idea.

At present, cement prices are hovering in the Rs 230-240 per bag range in Maharashtra, whereas it���s priced at Rs 250 per bag in South and Rs 235 per bag in North. In Gujarat, a 50-kg bag costs around Rs 200.

���We may increase prices by Rs 5-8 per bag, as demand of cement, especially from infrastructure sector, has been growing,��� said Vinod Juneja, MD of Binani Cement.

AL Kapur, managing director of Ambuja Cements, told ET that demand and prices of cement are directly related.
���Its natural for prices to go up if demand increases. Sometimes, the dealers and retailers charge more on the back of increased demand. If similar situation arise now, we may consider a price hike.������Pricing depends on market forces. As a company, we don���t comment on our pricing,��� said DD Rathi, whole-time director & CFO, Grasim Industries.

���There is a possibility of a slight increase in the range of Rs 5 per bag across the country. Even if it happens, cement prices will continue to be cheaper than some other essential commodities,��� said HM Bangur, Cement Manufacturers��� Association president and managing director of Shree Cement. The outlook for the January-March quarter is expected to be better than what it was a year ago, as cement despatch has started going up, said an analyst with domestic brokerage firm.

For example, Aditya Birla group���s cement shipments in January rose 7.4% year-on-year to 3 million tonne. Production for the same month rose 9.8% to 3.04 million tonne. Swiss cement maker Holcim-controlled ACC reported a 12.5% rise in January shipments from a year-ago period to 1.89 million tonne.

Industry experts don���t expect cement prices to soften in the current fiscal, especially with the demand growing at over 5%. Over the longer term, however, they expect prices to fall, as new capacities come up for production.

The real estate sector accounted for almost 55% of demand for cement in FY07. India has more than 70 cement companies and a total installed capacity of 200 million tonne.