Economy & Market
Cement prices take a dip in December
The cement prices have fallen by around Rs 8-10 per bag of 50 kg. Among the major cities, the price fall has been more severe in cities like Chennai and Kolkata where the price has fallen by around Rs 10-15 per bag to reach Rs 235 and Rs 230 per bag respectively. On the other hand, in cities like Mumbai, major cities of Gujarat and of the northern region, the price correction has been limited to Rs 5-7 per bag. As per the dealers, the prices are likely to pick up gradually from middle of this month.
The cement industry normally records impressive offtake in the second half of a fiscal due to the post-monsoon pick-up in construction activity. In October 2010 the industry posted a robust volume growth of 17.5 per cent year on year (YoY). However, the momentum in the volume growth failed to continue in November 2010 as the major players posted a decline in their volume. The offtake is improving in Gujarat, Mumbai and Rajasthan whereas it has remained lacklustre in Andhra Pradesh, Tamil Nadu and the major cities of the eastern region.
During H1FY2011 the domestic cement industry added around 22 mmt of new capacity (excluding ACC and Ambuja Cements). Further, as per the expansion schedule of the cement companies, around 12 mmt of new capacity is likely to commence production by the end of FY2011. With this capacity addition there can be pressure on the utilisation ratio and consequently on cement prices.
Due to the frequent fall in the cement prices coupled with a poor dispatch growth posted by most of the companies for November 2010, the stock price of most of the cement companies in the last one month has corrected sharply in the last one month. The broader market has corrected by around 3 per cent whereas the stocks of most of cement companies have corrected by 3 -18 per cent.