Cement prices across the country are under pressure. Even as the peak construction period has set in, poor demand and inactivity in the construction space have hit prices.
The average price of a 50-kg bag of cement has slipped 10 per cent through the last two months to Rs 270, compared with Rs 267 in the corresponding period last year. In October, the average price had touched Rs 300 a bag. Experts said in the quarter ended December, demand for cement hadn't picked up as expected. "Lack of other building materials such as bricks in the northern region, along with a shortage of labourers, hasn't let construction activities pick up. The prevailing cold wave in the northern and central regions have also impacted construction," said a research analyst at a Mumbai-based brokerage house.
After hitting an all-time high of Rs 314 a bag in July last year, cement prices started declining, as rains spread across the country. In September, prices rose, touching a high in October. After that, prices fell, as demand failed to pick up steam.
Sreekanth Reddy, executive director at Andhra-based Sagar Cements, says, "The demand scenario is poor and prices in the state have slipped by about Rs 50 for a cement bag since November. Currently, prices range between Rs 210 and Rs 215. Also, some new plants have been commissioned in the state, and this has hit the situation further." Through the last few years, Andhra Pradesh has seen the highest capacity addition in the cement space. Owing to the availability of limestone on a large scale, several cement plants have mushroomed in the state.
Currently, retail prices of cement are the highest in the eastern region (about Rs 300 a bag), while the average price in the South is about Rs 290. The North has seen prices fall by Rs 35 to Rs 245 a bag, while in the western region (which recently saw a rise in prices, especially in Gujarat) cement prices stand at Rs 270 a bag. In Madhya Pradesh and southern Uttar Pradesh, prices stand at Rs 240 a bag.
Executives in cement companies say the demand for cement would rise by the third week of this month, adding this would help raise prices.
Correction in the prices of building materials has also had an impact on cement stocks. For the majority of last year, shares of cement companies rose, irrespective of the overall market sentiment. Of late, the rise in share prices has been arrested and some stocks saw slight corrections as well. India's cement-making capacity is about 350 million tonnes, the second largest after China. The sector accounts for about 50 companies. The top five - UltraTech, ACC, Ambuja, Jaiprakash Associates and Shree Cements - account for about 45 per cent of the market.