South-based cement majors forced to hike prices to recover input costs
N Madhavan
CHENNAI, December 29: In yet another joint move (read cartel operation), all the major cement players in south have hiked retail cement prices by Rs 5 per bag, last week. This is the second such price hike in about a month's time and has pushed up tags, in the case of most brands, to levels slightly higher than what they were in early September.Analysts interpret this as a move to recover some of the increased input costs. The price hike comes at a time when the offtake has reportedly fallen sharply in November and December. According to industry sources, unusually persistent rains in the southern districts of Tamil Nadu and Kerala have dampened the offtake, significantly, at a time when it usually begins to pick up. "November was a washout and December continues to be very bad and we do not expect any pick up in demand before pongal," said a top marketing executive of a cement company. Provisional despatch figures released by the Cement Manufacturers Association (CMA) for the month of November
confirms this. The cumulative growth of major players in south during November is only around two per cent. Reportedly, Kerala registered a negative growth of about 2.5 per cent while Tamil Nadu remained stagnant. Interestingly, as per the latest figures released by CMA, there has been a sharp increase in despatches in south during the lean period (September to November) and this made up for the poor show in the earlier five months. During this period, demand grew by 13.52 percent as against 4.3 per cent in April-August '97. The overall growth rate in south was 7.5 per cent upto November '97 compared to 8.7 per cent growth nationally. A source opined that the despatch figures for south during September-November do not indicate the true state of affairs. The figures are high because the stocks have moved from the factory to godowns. "Each company is holding stocks to the extent of 11,000 tonnes as against the normal level of 3000 tonnes," he said, and added that the higher despatch figures have to be
discounted to the extent of increase in capacity in the southern region by about nine per cent. Mid-September saw a price war among the southern players consequent to the launch of low-priced Surya brand by India Cements Ltd (ICL) to counter dumping of cement by the Andhra-based manufacturers. This forced most companies to slash prices by Rs 10 to Rs 15 per bag. But then at that price levels they could not recover costs, especially at a time when the input and transportation costs had gone up significantly. Left with no alternative, the players had to come to the negotiating table and thrash out a solution. Consequently, manufacturers from Andhra were forced to increase the prices to appropriate levels.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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