Leading cement manufacturers in Mumbai, the largest market in India, have been forced to slashed prices by Rs 10 per 50 kg bag due to a huge pile-up of inventory.
The gross prices now ranges between Rs 130-132 per bag. This is the first time that cement prices have shown a downward movement in the Mumbai market in several months, and had been continuously moving northwards since July.
Industry officials said besides a slowdown in construction activity in the region, dealers had also been holding large quantity of stock on expectation that prices would rise due to rising input costs, particularly of diesel.
The Brihanmumbai Municipal Corporation's (BMC) has also decided delay its World Bank funded road concretisation programme. The construction activities that were expected to pick up after monsoons have not yet begun to gather steam, senior industry officials said.
"This is a very unusual situation. Cement despatches have picked up after the monsoons, and the industry was expecting that prices would on the other hand move up in line with demand growth," said a senior industry official.
Apart from the open market dynamics of demand and supply determining the prices, the drought-hit states namely, Gujarat, Rajasthan and some pockets of Maharashtra, have caused a major concern to manufacturers.
The change in Mumbai markets could have a ripple effect on prices in the nearby markets as well. Cement prices had shot up by Rs 7 a bag in July and then again rose by another Rs 4-5 in August. Subsequently, again in October, Mumbai prices had jumped by Rs 6-7 per bag.
