Cement prices may dip by up to 10%

Cement prices could fall by up to 10% in the coming months, pushed lower by new supply and slower construction activity during the monsoon season, industry officials said. Rates in Mumbai may see the steepest fall before the four-month-long monsoon season ends in September, dropping by about Rs 20 for a 50 kg bag, a senior industry official said. “It could be around 8% in the other three regions (North, East and South). Prices will start softening by Rs 5-7 per bag from June,” he said. A drop of Rs 20 will bring retail cement prices to Rs 240 a bag in Mumbai, Gujarat and the southern states and around Rs 230 in the north and the east. Large cement companies such as ACC, Ambuja and Grasim are expected to decide on pricing in the next few weeks. Last week, ACC had said it could cut prices in some regions. Ajay Kapur, head (commercial and marketing), Ambuja Cements, was of the view that demand would be “healthy but prices could fall by 3% during the monsoon and a further 4% by December, depending on capacity additions.” India has more than 70 cement companies with a total installed capacity of 210 million tonne. Some 20 million tonne will be added by August and another 30 million tonne by December. HM Bangur, managing director of Shree Cement and president of the Cement Manufacturers’ Association, expects pressure on prices because of the additional capacity and demand slowing by an estimated 6%. “I don’t want to comment on pricing but a lot things would depend on the policies of the new government and budget allocations for infrastructure,” he said. In April, ACC and Ambuja Cement marginally added to their inventory by selling less than they produced. ACC produced 1.84 million tonne and sold 1.8 million tonne in April. However, output was higher by 2% and sales by 4% compared to a year ago. Ambuja Cement produced 1.65 million tonne and sold 1.54 million tonne last month. Sanjay Ladiwala, president of Cement Stockists and Dealers Association, told that the industry currently faces a shortfall of 7 million tonne and demand will fall in the next few months. According to the Cement Manufacturers’ Association, the next three years will see 110 million tonne in capacity being added at an investment of about Rs 50,000 crore.