Mumbai: Cement manufacturers in Andhra Pradesh and Maharashtra have raised prices as construction activity gathers momentum after the monsoon season.
“Cement majors have announced a price hike of Rs5 per bag and other regions are likely to follow suit soon,”said Sandeep Nanda, executive vice-president of brokerage firm Sharekhan Ltd. “Post-price hike, wholesale cement prices in Maharashtra will stand at Rs245-250 per bag and at Rs230 per bag in Andhra.”
“This will augur well for companies which have a significant exposure in Maharashtra and Andhra,” Nanda said. Prices have started to rise gradually across the country. “This is the beginning of the post-monsoon price hike and soon other states and regions will follow suit. We expect prices to go up in the eastern region in the next 15 days.”
“From the earlier feedback we had got from the dealers, we did not expect cement prices to rise before January 2008. Therefore, the earlier-than-expected price hike is a positive surprise and will drive our earnings higher than expectations,” Nanda added.
“We expect prices to increase by Rs5 per bag in the western and southern markets and remain flat elsewhere,” said Revathi Myneni, an analyst at Edelweiss Research.
The demand growth in the South continued to be strong at 3.3% year-on-year with Andhra being the forerunner. However, a 21.4% year-on-year consumption growth for October was largely supported by a 38% year-on-year growth in Tamil Nadu (accounting for 31% of southern offtake), Myneni said.
Andhra witnessed a 26.3% year-on-year growth in demand, which was fuelled by increasing number of irrigation projects, government housing projects and complexes being built by private players.
Inventory levels are comfortable with four to six days, of stock with dealers due to a slowdown during Diwali when markets were shut. Inventory levels are 10 days in Tamil Nadu due to the monsoon.
The dealers in the North were unhappy with the offtake. While despatch growth was healthy at 14.2% year-on-year in October, dealers have not witnessed any significant growth in consumption.
Haryana and Rajasthan, which account for 34% of northern consumption, have been the outperformers in demand growth. Demand in New Delhi has also picked up owing to a boost from airport and infrastructure projects.