Sanjay Ladiwala, president, Cement Stockists & Dealers Association, Mumbai, and V Srinivasan, Angel Broking share their view on the cement price hike which took place across the country. The price increase will help companies to improve their margins going forward. In the eastern region, prices have increased by about Rs 40-50 per bag and by Rs 25-30 per bag in northern region. In Maharashtra, price has increased by Rs 20 per bag.
"Both diesel price and railway freights have increased. So, it was essential for companies to increase the price," says Srinivasan.
Q: Reports indicate that cement firms have hiked prices on the back of improved demand. How much price has been increased and is there any scope for further increase in cement prices?
Ladiwala: The prices have gone up substantially across the board since January. Good news is that – the southern region is holding steady because of oversupply situation which is present there. But north and east have seen substantial increases. The eastern segment has risen quite sharply. In the eastern region, prices have increased by about Rs 40-50 per bag and by Rs 25-30 per bag in northern region. In Maharashtra, price has increased by Rs 20 per bag. So overall, by and large, the prices have been seeing an upward trend and the demand also looks healthy. So these prices are supported.
Q: We understand that there are also pockets where prices have not risen and have probably even been dropped or at least discounts offered. Are there pockets where things are very difficult yet and producers are not able to raise prices?
Ladiwala: Generally, in some pockets where the prices have gone up very sharply, material from other regions tends to flow in, especially in Gujarat - the prices had gone up first in January itself, while it did not increase in rest of the country.
So, there is lot of material inflow from other regions into Gujarat. Therefore, the prices were under pressure because of extra outside supplies coming in, we are seeing some corrections there. It is more of aberration because if you study, in February prices never come off. Correction is seen because prices have gone up abnormally. But barring that, no other region has seen any corrections. The prices have risen but a little late instead of rising by first week of January.
Q: What is your view on the price hike? There are reports that things are pulling back a little in Gujarat as prices are already up. Which companies do you see gaining from yesterday’s move?
Srinivasan: There was a steep decline in prices of cement in the December, so the margins of most of the cement companies fell substantially. So this price hike was always expected. Prices started moving post Makar Sankranti, after January 15. There has been some correction only in Gujarat, because it was the first place where the prices did increase in December end.
Q: How much will margins come back and for which companies?
Srinivasan: More than demand pick up; steep hike in freight trade is impacting the industry. Both diesel price and railway freights have increased. So, it was essential for them to increase the price of cement. Margins of all cement companies should improve going forward. The extent of margin increase can be calculated only once the entire quarter gets over.