Home BusinessTelangana crisis pushes cement prices up
Production, despatch affected by turmoil; rail wagon shortage hits momentum.
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The ongoing agitation for a separate Telangana state has disrupted supply and triggered a rise in cement prices in western parts of the country, especially the Mumbai region.
Andhra Pradesh (AP) has nearly 50 small and medium cement manufacturing units and the monthly output from these is normally between 2-2.2 million tonnes. Industry sources said Orient Cement and Andhra Cement are among those who had to shut their units for some days in December.
This is because the turmoil has not only affected demand but also transportation of the commodity via rail and road. There has also been a shortage of rail wagons since November, that had originally sparked a series of price rises across western and southern markets. Due to transportation uncertainties, some manufacturers had to shut production, as storage is a major issue with this commodity.
When asked, company officials declined to say anything; the Cement Manufacturers Association was not available for comment.
"Andhra accounts for nearly 60 per cent of the south Indian cement market and also supplies cement to the Mumbai and Gujarat market. The supply in AP has been impacted by around 10-12 per cent due to plant shutdown, which has also impacted its dispatches to the western markets," claimed Rupesh Sankhe, analyst with Mumbai-based Angel Broking.
Also, construction activity has almost come to a standstill in Andhra, with some companies like Bharat Forge even considering relocating operations to states like Gujarat.
"While demand has gone up in Mumbai, arrivals are yet to pick up. Despatches are expected to rise in some time. However, traditionally, February to May is a period of high demand and prices should be on the upward curve in the Mumbai region during this time," explained Sanjay Ladiwala, president of the Cement Stockists and Dealers" Association.
Currently, the wholesale billing price is Rs 250 for a 50-kg bag in Mumbai, while retail prices are around Rs 265 a bag, Ladiwala informed. This is up marginally by Rs 2-3 in the last one week and has increased by around Rs 10 per bag over November prices.
Prices in Andhra had firmed up from Rs 145 in October to Rs 155-160 by November-end, while in Karnataka and Tamil Nadu, the commodity was then selling for Rs 165 and Rs 175 per bag, respectively.
South Indian players were expected to go in for "pricing discipline" after cement prices had crashed below Rs 140 in September-end, Sankhe said. Things are, however, very different now.