Cement prices zoom in Eastern India - Views on News from Equitymaster

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Cement prices zoom in Eastern India

Feb 9, 2000

The much delayed recovery in cement prices finally seems to be happening. Cement prices in eastern India, according to reports, jumped 19% during the month of January. The other regions also showed promising signs for a better pricing environment.

The cement sector has recorded a sharp rise in volume sales since November 1999 (post monsoon). However, even though sales continued to exceed production volumes (implying lower inventory and possibly higher capacity utilisation levels) prices remained sluggish in especially the eastern and southern markets. The concern in these markets emanated from the intense competition and lower than expected infrastructure spending. The western markets however performed much better in terms of pricing environment as infrastructure spending continued to be robust.

The report that prices have jumped 19% in the eastern markets and 6% in Mumbai (western India) will bring much relief to companies. Further prices have steadied in northern markets and southern markets too are expected to post a rise in prices.

The rise in prices will go a long way in improving the profitability of companies, especially those in the eastern and western markets. The hike will also enable these companies to withstand the adverse affects of the rise in diesel prices.

The sustainability of the rise in cement prices cannot be guaranteed. This is mainly due to government's uncertain track record as regards its commitments to infrastructure spending. A delay or slowdown in infrastructure spending (remember the burgeoning fiscal deficit) could adversely affect prices. Added to this is the concern that investment activity in the manufacturing sector has remained sluggish. These factors could as yet have an adverse bearing on the cement sector.


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