Cement sales seem to have revived across regions in December after a lull in the preceding two months. The pick-up in cement demand was attributed to revival of infrastructure and real estate projects, especially in rural areas. The sales would have been much better if not for untoward developments in Rajasthan, one of the major cement manufacturing hubs.
“Dispatches from our plant in Rajasthan were impacted by the rail roko and agitation on road by the Gujjar community. Besides there were disruptions in Andhra Pradesh also,” said a cement company executive.
Mr Shailendra Choksi, Director, JK Lakshmi Cement, said the distribution was affected due to the Gujjar agitation in Rajasthan. The Rajasthan development was a short-term phenomenon and agitations have been withdrawn and traffic returned to normal, he added.
The southern markets remained week despite revival in demand from real estate sector due to excess supply.
Demand is expected to gain momentum in the March quarter which is traditionally considered a strong as most of the infrastructure and real estate projects are revived post monsoon.
INPUT COST RISE
With the revival in demand cement manufacturers are exploring the possibility of passing on the rise in input cost to end consumers.
Cement companies have been reeling under sharp spike in fuel and power cost during the last few months. For instance, coal price has risen to $225 a tonne in the December quarter compared to $210 a tonne in the September quarter, he said.
Ms Vinita Singhania, Managing Director, JK Lakshmi Cement and President of Cement Manufacturers' Association, said the unabated rise in energy cost, transportation and availability of adequate raw material are the main areas of concern for the industry.
“The industry is experiencing acute shortage of coal. Currently only 50-55 per cent of the coal requirement of the industry is supplied through linkage. The balance is procured from open market or imported. Use of alternative fuel pet coke at considerably higher cost than linked coal adds to the cost of manufacturing,” she added.
The availability of railway wagons to the cement industry is much lower than the requirement despite increase in cost. The railways have changed the classification of cement resulting in 4-5 per cent increase in the railway transportation cost.
PRICE HIKE
Most companies plan to hike prices by Rs 5-10 for a 50 kg bag in two tranches in January. To start with, the western region including Mumbai and Maharashtra has witnessed an increase of Rs 8 a bag. A similar or moderate hike will be implemented in the northern and southern markers soon, said a dealer.
Cement prices in the retail market currently in Mumbai average at Rs 257 a bag, Delhi Rs 210 a bag, Chennai Rs 250 a bag and Kolkata Rs 240 a bag.
Shares of most cement companies on BSE closed with a gain on Tuesday. ACC gained 1.17 per cent at Rs 1,029, UltraTech Cement 2.52 per cent at Rs 1,018 and JK Lakshmi Cement was up 1.04 per cent at Rs 53. Ambuja Cement and Jaiprakash Associates were down 0.67 per cent at Rs 127 and 2.62 per cent at Rs 95 respectively.