North India sees surge in cement demand; prices may rise

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Cement prices are on the rise again, especially in regions in north India. Experts say prices may soon hit levels seen in the first half of financial year 2010. CNBC-TV18's Neha Bothra and Shruti Rajkumar report.

Demand for cement is rising, and pulling cement prices higher in the bargain, especially in north India.

CNBC-TV18 learns that cement may cost Rs 15 more per bag, and that this hike may come into effect from the February 18. Sources indicate that with this rise, cement in Kanpur and Lucknow could touch Rs 305-310 per bag.

Experts blame a demand-supply mismatch for this rise in prices. They point out that the rise in demand has been triggered by government-led infrastructure projects in states like Bihar, which are now resorting to sourcing cement from far-off markets like Uttar Pradesh.

Sumit Banerjee, MD, ACC, says, "This whole thing is about demand and supply and how the gap between these pans out in a given market and I do feel that we have been underestimating the growth potential of cement companies in India."

Sources say several South India-based cement companies have also been getting trade enquiries to supply to Madhya Pradesh, Uttar Pradesh and Bihar. And the huge transport costs involved in deliveries may push prices higher as well.

Says RG Bagla, Group Exec President, JK Cement, "We are not getting railway wagons. There is a logistical problem. Trucks are not overloading because of the apex court's order. So although I am carrying a stock of about 2 lakh tonnes, I am not able to supply it to the right market."

Experts say companies like ACC, Prism Cements and JP Associates are most likely to benefit from this increased demand. Remmeber, ACC has already, in 2010, hiked prices in Uttar Pradesh by nearly 80 rupees per bag.

However, they add that prices may ease a little starting May, when there is lower demand due to the monsoons. Also, companies have been expanding capacity, and an increase in production due to these exercises should kick in around that time.