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Rise in cement prices a cyclical blip

Rise in cement prices a cyclical blip
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First Published: Fri, Feb 19 2010. 12 06 AM IST
Updated: Fri, Feb 19 2010. 12 06 AM IST
Mumbai: Yashwant Mishra, senior joint president and marketing head, Mangalam Cement Ltd, and Sanjay Ladiwala, president, Cement Stockists and Dealers Association of Mumbai, shared in an interview their perspective on cement prices in the near future. Edited excerpts:
Do you see the rise in cement prices as a sustainable trend or it’s just a two-month phenomenon, and once the peak season is over, prices will slip back once again?
Mishra: I think three-four months would not be a problem. Once the monsoon comes only then we can talk because Commonwealth Games will work up to July-August. So till that time demand would be there.
There is short supply of wagons and... road movement as well. Because of all these reasons, the industry is operating only at around 87%; 13% is already discounted.
Is this just a seasonal blip or anything more than that?
Ladiwala: It’s a cyclical blip because in the peak period obviously every year the rates do go up.
But this time, in spite of higher capacities being installed, it (prices) has been augmented and supported by the shortage of wagons. Foodgrain movement has been given priority and since wagons have been diverted there, there is a huge logistical problem of reaching the finished product to the market.
If that inflow starts, obviously the prices would not be at the rate at which they are growing. But that has aided and abetted the rise in prices. So that’s a temporary phenomenon which we are seeing. Till such time that is addressed, prices would rule higher and certainly till the monsoon starts, we should be seeing stable and high prices.
Has the cyclical blip also been up because of the demand for the Commonwealth Games?
Ladiwala: Not really because Commonwealth Games is concentrated only in the Delhi area and has augmented the demand in that area. But it is basically the long-term infrastructure growth story which we are seeing, the government’s commitment towards infrastructure which is the driving force.
How much is the price gap between north and south India?
Mishra: The thing is that cement is always region-specific; you cannot have south India players to go in north India fully or north Indian players going to south India fully until and unless there is a big gap in prices.
So at present, the position is like this: Rs160 in the south and Rs240 in the north, so everybody likes to go (to the northern region), but they are not able to go. So that’s why north India is picking up prices and south India is lagging.
There has been some commissioning of new supplies also from the northern part of the country from large companies like Jaiprakash Associates Ltd (makers of Jaypee cement). Is that being easily absorbed or do you think once this peak season gets over that may have some sobering influence on prices?
Mishra: I am of the view that in the long-term, cement industry will have a good market. If 50% of the government commitment comes in time or in next two-three years, then the industry will be lagging supply because around when government demand will peak in 2013-14, supply will be a constraint if the situation remains as we have considered.
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First Published: Fri, Feb 19 2010. 12 06 AM IST