Export ban fear hits cement scrips

The market value of cement shares fell by 3 to 5 per cent today on fears that the government might ban exports of the building material in the next week's Budget, analysts said.

Cement companies exported 6.88 million tonne in the first nine months of 2006-07 compared with 9.19 million tonne in the previous financial year.

The bearish sentiment spread across the cement counter, with Grasim and Birla Corporation declining by over 5 per cent each. The Grasim scrip fell 5.18 per cent to close at Rs 2,415.85, while the Birla Corporation stock was down 5.51 per cent at Rs 266.75.

Cement giant ACC declined by 4.41 per cent to close at Rs 963.50. The stock of Gujarat Ambuja Cement, which exported around 2 million tonne so far this year, fell 3.35 per cent to close at Rs 126.75. Prism Cement declined 4.81 per cent, while UltraTech Cement fell 1.35 per cent and India Cement and Shree Cement dropped 3 per cent each.

According to a Bloomberg report, the government might ban cement exports to rein in the rising prices of the commodity and curb inflation, which was a major concern for the government at present, said Deepal Shah, analyst at ASK Raymond James & Associates.

Cement producers said it would be unfortunate if the government banned exports, as some units were set up near ports, especially in Gujarat, only for exports. If they could not export, it would be very difficult for them to sell cement locally on account of infrastructure and logistical problems, they added.

According to a report by broking firm Prabhudas Lilladher, the average price of cement across the country has remained stable in the last one month despite the government's import duty reduction from 12.5 per cent to nil on January 22.

The feedback from dealers shows that cement prices in February have been largely stable at January levels because of reluctance of cement producers to raise prices, at least in the short term.

However, Hyderabad reported a price hike of Rs 7 on February 8 to Rs 194 a bag, while in Kolkata, prices were raised by Rs 5 to Rs 218.

Prices in Mumbai, Bangalore and Ahmedabad continue to be stable. Dealers expect about Rs 10 rise in prices in Chennai in March (post-Budget).

Despite the unseasonal rains and the subsequent construction slowdown, prices in Punjab have also been stable at Rs 210 a bag.