Cement prices in AP set to stabilise by May

Industry expects prices to touch Rs 160 per bag after polls

Unlike in the past, this time the price hike may not need any concerted effort by the industry and may occur automatically due to factors like a drop in cement supplies from other states, exports and new infrastructure projects that will kick off in the next financial year.

Industry observers here are confident that only the month of April may be an exception with depressed prices due to elections.

During the last seven months, the cement industry in Andhra Pradesh went through a volatile phase. The prices plunged to a three-year-low of Rs 85 in September and then recovered rapidly to hit a high of Rs 165 in December. The prices hovered at around Rs 145 in Hyderabad in January.

Industry sources in February expected prices to touch Rs 140-150 by March end. However, current prices in the Hyderabad market are around Rs 130.

The prices were Rs 115-125 in Chennai, Rs 120-125 in Bangalore, and Rs 120-130 in Thiruvananthapuram during September 2003 as against the current prices of Rs 150-160 in Chennai and Bangalore and Rs 160-170 in Thiruvananthapuram.

The cement players in the state are not much worried over the recent slide in cement prices and they do not appear to be in any hurry to make any concerted effort to keep the prices high.

They expect that along with various demand factors the diversion of cement supplies by the cement companies in Maharashtra, Madhya Pradesh and Orissa from Andhra Pradesh to the northern states like Bihar and Uttar Pradesh would augur well for the industry in Andhra Pradesh in the post-election scenario up to the monsoon period.

The increasing trends of exports from players on the west coast, Gujarat and Rajasthan, have also ensured that cement supplies have not been diverted to Maharashtra which is a big consumer. Consequently, there has been a cascading effect with reduced supplies from Maharashtra to AP and the south.

Exports from Gujarat and Rajasthan have touched 4.8 million tonnes till January this fiscal, and the total exports are likely to cross the 5.5 million tonne mark, according to industry sources. An offshoot of this is that Andhra Pradesh also made a beginning in export of clinker this year.

So far over three lakh tonnes of clinker have been exported to countries like Bangladesh, Singapore, Burma from the state. Indications are that there will be good potential for much higher exports from AP, Tamil Nadu and Karnataka in the coming year.

A decade back, the Andhra Pradesh plants used to despatch cement to all parts of the country, and now the trend is expected to be repeated giving the much-awaited strength to the AP-based plants.The mismatch between supply and demand is expected to narrow down considerably in the coming years.

With Lok Sabha and state elections scheduled for next month, the pending projects are being completed at a feverish pitch, lending the much-needed relief to the beleaguered cement industry. The importance of government works is that they consume 40 per cent of the cement despatches.

Among the other demand drivers, the cement industry sources list, are rise in imported coal prices in the international markets and due to increasing demand for coal by domestic thermal power plants and user industries; shortage of trucks in the summer due to agricultural and fruit transport; higher input costs of power and diesel and excise duty;upcoming of infrastructure projects like roads,airports and ports. They also point to a huge demand next year when norms for rural housing finance are expected to be eased.

At present, there are 24 major cement plants in Andhra Pradesh with a total installed capacity of over 24 million tonnes. Of them, 21 are members of Cement Manufacturers Association (CMA). Four plants of CCI, Andhra Cements Panyam and Krishna Cement Works are not operating at present.

After a gap of two years, Panyam Cements was said to have operated only for sometime this year. The 20 major companies operating now account for a total installed capacity of around 23 million tonnes. Of the originally started 30 mini cement plants in the state, only 10 are operating with a total capacity of around 2.24 million tonnes.

The total cement despatches in the state in the last financial year were 10.38 million tonnes. Of this around 1.5 million tonnes were expected to have come from outside the state.

The total despatches by the major cement companies in the state were said to be around 13.29 million tonnes for the year 2002-03 and around 5 million tonnes were sent outside the state, according to the sources here. The 10 operating mini cement plants were said to have dispatched 1.83 million tonnes last year.

This financial year the despatches are expected to cross 10.8 million tonnes with a significant drop in supplies from outside the state.

The certainty of despatches crossing the 10 lakh tonne mark to cross 10.25 lakh tonnes, as against 9.23 lakh tonnes in March last year is an indication of the growing demand, the sources explained.

The despatches in the first 11 months of the current financial year went up marginally as compared to the despatches in the corresponding period of the last financial year.

The dispatches during April-February of current fiscal were at 9.79 million tonnes, an increase of 3.6 per cent over 9.45 million tonnes recorded in the corresponding period last fiscal.