'Stressed' cement firms planning to raise rates

Last Updated: Tue, Mar 05, 2013 06:15 hrs

Cement manufacturers are mulling to raise prices following the recent rail freight hike as well as last week's petrol and diesel price increase. According to manufacturers, they need to hike prices by six-eight per cent to ease their burden.

According to H M Bangur, managing director of Shree Cement, a price hike is inevitable. "The recent developments will have a long-term impact on the industry. Prices are likely to soar to the tune of six-eight per cent," he said.

Heidelberg Cement has already raised prices by Rs 10 per on a 50-kg bag in some parts of the country.

Large players from western India and elsewhere are assessing the situation before increasing prices. However, an industry source said that a price hike is inevitable. If not now, hikes will come in a week or two, he added.

According to industry reports, February dispatch numbers have turned out to be poor and the recent diesel price hike for bulk buyers is also putting an additional burden on the counters. For each million tonne of cement produced, prices will go up by Rs 13-15 crore owing to the recent developments, said a top official of a cement company.

However, according to analysts, any further price rise at this juncture would dampen demand in the market. Demand is already subdued due to oversupply in the market.

In January, the industry witnessed its first major hike after the monsoon. While the northern region saw prices jump Rs 20-25, prices were up Rs 15-20 for a 50-kg bag in the western region. Eastern markets, too, saw a northward trend in cement prices.

After the January price rise, all-India average price was hovering around Rs 280 a bag.

Vinod Juneja, managing director at Binani Cement, said margins are tight and market conditions bad.

"We are already operating on a thin margins and our intention is to absorb as much as possible. But having said that, we are closely watching the situation and may have to pass some burden to consumers."

Juneja added that the hike in coal import duty, too, will play a spoilsport and hinted at a price rise of over 5 per cent.

In fact, following diesel price hike, the apex truckers' body All India Motor Transport Congress (AIMTC) effected a 15 per cent increase in the freight charges across the country. AIMTC has around 8 million trucks under its fold.

A recent report by rating agency India Ratings also hinted at an imminent price rise. Ultratech Cement, India's largest cement maker, has already mentioned in its latest annual report that the poor demand growth might continue for the next two years. Capacity utilisation by the industry was at 76 per cent in FY12, which was the same as in FY11. India's total cement making capacity now stands at over 330 million tonnes.

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