Uptick in cement price likely next year

Price may go up by 7-8% beginning February in TN

The price of cement in Tamil Nadu could rise early next year if a strong demand from the retail segment is triggered after Pongal, adding momentum to the existing pick-up in demand, said people associated with the industry.

The retail price of 'A' category cement (such as Ramco Cement and Coromandel Cement) in Chennai is around Rs 160, said a dealer in the city.

Cement dealers forecast a rise in price of about 7 per cent to 8 per cent beginning February when the impact of higher retail demand for cement would kick in.

A cement company official said that he expected some increase in price after the monsoon because demand is expected to increase in the last quarter of the financial year.

Industry sources said that the differential tax regime on cement in Tamil Nadu has been a factor that acted as a check on the rise of cement price this year (the tax rate is higher when cement is sold above a threshold price). However, this factor too is not expected to prevent the rise in price early next year.

The current financial year has already seen growth in cement demand in south India outstripping other regions.

According to statistics available with Cement Manufacturers Association, despatches in south India between April and October this year stood at 20.96 million tonne, a growth of 17 per cent compared to the previous year.

The all-India despatches for the same period stood at 73.35 million tonne, a growth of 8 per cent over the previous year.

In south India, demand was driven by the growth in the biggest markets: Tamil Nadu and Andhra Pradesh. Between April and October 2005, cement despatches in Tamil Nadu stood at 6.31 million tonne, up by 22 per cent when compared to the previous year.

People associated with the cement industry said the growth in demand was fuelled by a combination of infrastrucutral activities, including demand from road projects and construction industry.

The growth in demand in Tamil Nadu and Andhra Pradesh, however, did not have a marked impact on the price. An industry analyst said that most companies operated way below capacity last year. Therefore, the industry was able to meet a surge in demand without there being an impact on other factors, he added.

India Cements, for instance, which has an installed capacity of 8.81 million tonne, produced 5.49 million tonne of cement last financial year. In the April-October 2005 period, the company had already despatched 5.06 million tonne of cement.