Cement firms to go for price cuts
Dec 02 2012 , Mumbai
Post-monsoon demand remains subdued in infra, realty sectors
Monsoon may be over, but demand for cement in the country has not yet revived from sectors such as infrastructure and real estate. As a result, cement prices are likely to decline by Rs 10-15 per 50 kg bag across the country in December.
“In the western region, cement companies decided on a price cut of around Rs 10 per 50 kg bag from December 1. In other regions also price cuts are expected soon, a senior official from Cement Manufacturers Association of India told Financial Chronicle.
After the price cut, a 50 kg bag of cement costs around Rs 290 on an average across the country.
Vinita Singhania, managing director of J K Lakshmi Cement, told FC that the demand for cement is not picking up as expected. Until large infrastructure projects picks up and a revival in real estate demand is witnessed, demand for cement is likely to remain under pressure. Further, during the winter season, labourers tend to go back to their native places, which also impacts construction activities in the north.
A study by tariff commission says that 64 per cent of demand for cement is driven by housing, 6 per cent by industrial, commercial and, institutional demand accounts for 13 per cent and infrastructure 17 per cent.
Ravi Sodah, an analyst at Elara Capital, said the prices are falling not only because of weak demand but cement companies are cutting prices as they are trying to meet their year-end target and push sales.
Sodah said that demand for cement has not picked up as expected post monsoon because of which prices are declining. This would impact margins of cement companies.
Cement companies had increased prices in September, soon after the retreat of the monsoon, but the prices didn’t sustain due to lack of demand.
A senior official from Ambuja Cements said, “The price cut taken by cement companies are not only because of low demand, but companies are trying to push sales by cutting prices to meet their yearend sales target.”
Rajesh Kumar Ravi, analyst of Karvy Stock Broking, said the price correction comes as the sector has not seen demand grow as per expectations. “Every year post monsoons, cement prices increase as construction activities revive in the country. Cement companies have cut down prices by around Rs 10-15 per 50 kg bag in November in the northern and eastern region.”
The official from Cement Manufacturers Association said that cement prices might start witnessing an upward trend after January 15, once companies start focusing on completing infrastructure projects.