Cement prices may come down in the coming months due to reduced offtake as an upshot of the onset of monsoons, when construction activities slow down, and the spike in housing loan rates that is round the corner. The cement companies have also witnessed diminishing demands from infrastructure and real estate sectors. However, ballooning costs of raw materials, which constitute about 70-75 per cent of the cost of cement production, will continue to put a squeeze on margins of cement manufacturers.
During the January to March 2011 quarter, a sharp increase in coal prices and railway freight charges had nudged cement prices up by 8-12 per cent from the December 2010 levels. Prices of coal, which constitute 20 per cent of the raw material costs, saw a steep increase in March - in a multi-layered price increase. Holcim Group companies ACC and Ambuja Cements have reported 6 per cent and 12 per cent drop in month-on-month sales at 2.05 million tonne (mt) and 1.86 mn t in April. Ambuja Cements' sales in April were down 3 per cent compared with 1.91 mt registered last year. Apart from coal, cement makers had to fork out an additional Rs 8 per tonne for coal transportation through the Indian Railways. There could be a marginal dip in cement consumption from the housing sector due to the interest rate hike - this sector (including commercial buildings) accounts for almost 60-65 per cent of India's total cement consumption.