Housing to get costlier on 30% hike in cement prices
Sep 27, 2013
Source : The Economic Times


MUMBAI: After witnessing a price correction in all major markets owing to sluggish demand, cement prices have increased by over 30% in a month to Rs 275 for each 50kg bag. With the trend expected to continue, a cement bag is likely to cost over Rs 325 this festive season, hitting the ailing realty sector and making it costlier to purchase that dream home.

Cement makers attribute the development to an increase in raw material prices. Stocks of cement companies like Ultratech,ACC and Ambuja Cements are up as much as 20% since the start of this month on the back of the continuous rise in prices. A 50 kg cement bag, which used to cost Rs 210 last month, is now being sold at Rs 275 a bag and there are indications that the price may go up further to over Rs 300 by next week, said a leading cement brand’s dealer.

“Cement prices are likely to rise by Rs 30-40 a bag soon, but demand continues to be sluggish and I don’t know how to push up sales,” said a Mumbai-based dealer.

The price hike is affecting the realty sector and developers’ apex body Confederation of Real Estate Developer’s Associations of India (CREDAI) believes that a cement cartel is active. The confederation is likely to file a complaint with competition watchdog Competition Commission of India over the continuous rise in cement prices.

“Prices have increased from Rs 210 to Rs 275 over the past few days, and indications are that they will go up to Rs 325 per bag in the near future,” said CREDAI chairman Lalit Kumar Jain said that a hike of Rs 50 per cement bag leads to an increase of Rs 25 per square foot in construction costs and this will have to be borne by the consumer. “We are concerned about this sudden price rise, which defies logic. CREDAI will consider moving (the competition watchdog) Competition Commission of India against the cartel of cement manufacturers,” said Jain.

Analysts believe that cement prices this month have far exceeded the levels of correction witnessed during the previous couple of months due to a sluggish demand because of monsoons, and any further price hike may affect demand in the slowing economy.

Jinesh Lodaya, a senior research equity analyst at Tathastu Advisory, also said that prices are likely to go up further in the post-monsoon quarters and on the back of a festive season.

Ultratech ended at Rs 1,794 by close of Wednesday’s trade on the BSE, a gain of nearly 20% over the closing price of Rs 1,498 on September 2 – the first trading day this month. Similarly, shares of ACC gained 15% to Rs 1,096 compared to Rs 955 on September 2. Shares of Ambuja Cements also rose over 11% to Rs 189 from Rs 170 in the same period.


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