Broking firms foresee fall in cement prices ahead
The cement sector has been witnessing continuous disappointment in demand which has resulted in a drop in cement prices over the month, says a recent Edelweiss report.
June 13, 2011 / 17:02 IST
The cement sector has been witnessing continuous disappointment in demand which has resulted in drop in cement prices over the month, says a recent Edelweiss report.
A similar report by broking house Sharekhan also states that cement prices usually come under pressure during May. They are likely to decline further with the onset of monsoon. Edelweiss' report highlights that apart from the Southern region, prices in all regions have corrected sharply in the range of Rs 5-50/bag. Also, the current prices are down by Rs 5-60/bag when compared to the peak prices in March 2011. Ironically, the southern region which has lowest capacity utilisation has the highest prices, while the prices are lowest in the Central/Eastern /Western regions which have high capacity utilisation. Capacity utilisation is a measure to determine the level to which the productive capacity of a plant is being used to produce the desired goods or services.Edelweiss conducted a survey in 29 cities across India to get a region-wise demand and price trend in both trade and non-trade categories. As per Edelweiss, in the north, price correction was in the range of Rs 5-45/bag over the month due to low demand. The highest price correction of Rs 45/bag was in non-trade prices in Gurgaon. It is learnt that the gap in the trade and non-trade prices which is in the range of Rs 30-40/bag is widening. Prices in the traded segment can witness a further downward pressure if demand situation continues to be low. Prices in the eastern region have corrected in the range of Rs 10-35/bag when compared to the previous month. From the peak in March 2011, the current prices in the region have declined Rs 15-40/bag. Kolkata saw the highest correction in non-trade prices. Prices are lowest in Raipur/Durg cities of Chhattisgarh. A further fall in prices is expected by dealers with the onset of monsoon in the region. According to Sharekhan, the cement price in Kolkata decreased by Rs 10-15 per bag during May 2011. Almost all the companies in the city and nearby areas decreased their prices. The revised average price in Kolkata stood at Rs 270- 275 per bag. The key reason behind the sharp decline in the price was the slowdown in the cement offtake due to focus on election and increase in supply particularly from players like Lafarge and ACC.In spite of lowest capacity utilisation of nearly 60%, the current prices in the southern region are the highest in the country. Although, prices have corrected by Rs 5/bag in Chennai and Hyderabad over the month, they are still higher when compared to March 2011, says Edelweiss report.Sharekhan also highlights that the demand in Hyderabad remained sluggish and hence, the prices came down by Rs 5 per bag. They are currently quoting in the range of Rs 255-260 per bag. The cement manufacturers have cut down the production level to maintain the prices in the region. As per the dealers, the cement offtake is likely to be lacklustre going ahead. In the other southern states like Kerala and Tamil Nadu, the demand environment is relatively better. In Chennai, the prices declined by Rs 10 per bag during the month and are quoting at Rs 265 per bag.Elaborating the scenario in regions of Gujarat, Maharashtra and Central India, Edelweiss says, a drop in demand and increased supplies led to a sharp price correction in Gujarat. The non trade prices in Ahmedabad and Surat fell by nearly Rs 50/bag when compared to the previous month. The current non-trade prices in these cities are down Rs 50-60 compared to peak of March 2011. The region is expected to see some more pain in the coming weeks. Prices are expected to decline further. Cement prices in Maharashtra declined by Rs 5-30/bag. Nagpur witnessed highest price correction.In Central India, prices fell by Rs 5-25/bag when compared to the previous month. However, the prices have slipped Rs 20-45/bag against March 2011. The pace of price declines has slowed down in the past week. According to dealers, prices have bottomed out from a near-term perspective. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
