Mumbai: Cement prices are expected to rule firm in the coming months due to rise in input costs and manufacturing expenses, according to Centre for Monitoring Indian Economy (CMIE).
During 3Q FY 2012, power and fuel cost rose by 10.7 percent Y-o-Y due to twin effects of higher coal prices (both domestic and imports) and cheaper rupee against the dollar. Freight costs were also higher by 12.5 percent Y-o-Y due to increase in diesel costs and surcharge levied by Railways.
"(Cement) prices are likely to remain high in the coming months. The growth is expected to moderate as the base effect sets in. Prices are expected to recover and rise by 6.4 percent in FY 12, after falling in the previous year," the city-based think-tank said in its monthly review.
The prices are expected to average 3.8 percent higher in FY13, it said.
The cement price in Mumbai, one of the largest markets, shot up by Rs 42 per 50 kg bag, from Rs 248 in January 2011 to Rs 290 in January 2012. The average price of cement bag was Rs 292 in January 2012, CMIE said.
Meanwhile, the demand of cement is expected to improve in the coming months and growth in despatches is likely to be modest at around 4 percent during March 2012 quarter, the research outfit maintained.
Leading cement producer ACC Ltd said its production for February 2012 stood at 2.14 MTPA as against 1.97 MTPA in the corresponding period in 2011. The despatches increased from 2 MT in February 2011 to 2.15 MT last month.
Ambuja Cements' output shot up from 17.91 lakh tones in February 2011 to 19.93 lakh tonnes in February 2012. The despatches rose from 17.74 lakh tonnes to 20 lakh tones respectively.
Cement production of Aditya Birla Group-owned UltraTech moved up by 3.02 percent at 357.28 lakh MT for the period April-February FY12 as against 346.82 lakh MT during April-February FY11.
Despatches moved up by 3.2 percent at 357.41 lakh MT in April-February 12 vis-?-vis 346.33 lakh MT in the corresponding period last fiscal.
Cement output of UltraTech for February 12 stood higher by 4.96 percent at 34.68 lakh MT and despatches at 35.17 lakh MT, up 5.67 percent over February 11.
Going ahead, the rate of capacity addition of cement industry is set to moderate, with only 31 MTPA of capacity expected to be added over FY2012-13, much lower than 55 MTPA added over FY 2010-11, CMIE said.
However, a slowdown in demand has become a bigger concern, Angel Broking analyst Sourabh Taparia said.