Cement prices in AP seen stabilising at Rs 160-165

Though there is a concern among the cement producers in the state over the possible opposition from various quarters on the significant price hike in the recent past, especially when elections are around, they maintain that the current price level is not abnormal given the fact that the Crisil study, carried out in the year 2000, came out with a report that if the cement industry in Andhra Pradesh had to survive and grow, the selling price should be in the range of Rs175 per bag.

"Prices have gone up over the last four months due to the increasing demand for cement across the state. Cement companies, after suffering losses for more than a year, realised that they could not survive any more at such a low level prices.

"Increase in the prices in the neighbouring states of Karnataka, Tamil Nadu and Maharashtra helped us effect price hikes in the state," a cement producer told Business Standard.

Cement dispatches from neighbouring states have come down to a level of 70,000 tonnes a month from the the earlier level of over 1 lakh tonnes, due to increase in the cement prices in those states.

Cement producers in the state admit that the current price has come as a big relief to the mini cement units, which otherwise would have faced closure.

"In the last one year, at least five mini cement plants with an annual capacity of 50,000 tonnes to 1 lakh tonnes per annum were closed down. Three major cement units were also shut down," the source said.

Though there is a talk in the market that cement producers have again formed cartel to jack up the prices, industry players are denying it.

"More than cartelisation, it is realisation on the part of producers. If the prices are to be continued at below Rs 100 level, no company would survive," the cement industry sources maintain.

Cement companies numbering about 35 operating in the state, including outside companies with marketing presence in the state, put together sold about 8 lakh tonnes and 7.35 lakh tonnes of cement in October and November respectively in the state.

Despatches in December are expected to be around 9 lakh tonnes as against 7.90 lakh tonnes in the same month of last year.

" We expect the demand to go up significantly from the middle of January. The state government which has sanctioned 32 lakh toilets across the state is yet to procure cement for the construction. This activity alone is expected to consume about 7.5 lakh tonnes of cement over the next three months," a member of the Cement Manufacturers Association, said.

"With the state government planning to complete all the pending works within next two months, many road projects at take-off stage and booming housing activity, we expect the demand for cement to be good in the near future in the state," he added.