With marginal improvement in demand, cement companies across the country, barring a few southern territories, have hiked prices starting this week by around Rs 10-15 per 50 kg bag. Construction of roads and real estate projects has led to a sudden pick-up in demand after a long lull, industry officials told Financial Chronicle.

The move follows all-round improvement in prices in January and February, especially in the eastern region where the prices rose by around Rs 60-70 per 50 kg bag. Prices in the central and western regions rose by around Rs 30 and Rs 15-20, respectively, per 50 kg bag.

Vinod Juneja, MD of Binani Cement said, “Demand has improved across the country, mainly driven by construction of roads and highway projects. Demand from the real estate sector has also improved, mainly in the tier-II cities.” With improved demand, capacity utilisation of cement plants was at around 85-90 per cent, Juneja said.

Ashish Guha, CMD of HeidelbergCement India, said, “Demand for cement in 2013 was expected to be better compared with the past two years, as infrastructure projects were expected to be ramped up.”

“Also, individual house building in rural areas in Madhya Pradesh and Uttar Pradesh had been stable and, going forward, we expect it to grow further,” he added.

HeidelbergCement India has expanded its clinker manufacturing capacity from 1.2 mtpa to 3.1 mtpa at its Narsingarh unit and cement grinding capacity from 1 mtpa to 2 mtpa at Imlai units, both in Damoh district of MP. With the new capacity going on stream, the company has completed its expansion project worth over Rs 1,500 crore, to raise its all-India production capacity from 3.1 mtpa to 6 mtpa.

Following the price hike, the average cost of a 50-kg bag of cement works out to Rs 250-290, depending on the brand and the region.

“This was the peak season for cement companies because of which demand had slightly improved compared with the last quarter. Cement companies across the country, except for the southern region, increased prices this week due to improved demand,” said a senior official from Cement Manufacturers' Association.

The price recovery in the northern and eastern regions is stronger, while the western region witnessed moderate price hike. However, cement prices in the southern region continued to be bleak due to subdued demand and overcapacity.

Rajesh Kumar Ravi, an analyst at Karvy Stock Broking, said, “Demand was not as strong as expected during the peak season, but it had improved sequentially. Companies were trying to push prices with the slight improvement in demand.”

In the southern region, prices had not increased much due to oversupply, Ravi said. He added that the price hike would definitely help cement companies improve their margins in the January-March quarter.

jharnamazumdar@mydigitalfc.com