Cement & steel to cost more

The rollback of the stimulus package has started making its impact. A 2 per cent hike in excise duty to 10 per cent and Rs 50 per tonne cess on coal coupled with raised fuel prices, have ensured an increase in cement prices, which are, of course, to pass through.

Sanjay Ladiwala, head of Cement Stockists and Dealers Association, said, “Since demand is strong in north and west, passing of excise duty is not a problem as even the transportation costs have increased. All regions except south have increased the prices. We are likely to see further price increase due to increased demand. We have just entered the peak demand period, which is likely to continue till mid-June.”

The increase in costs has resulted in cement companies increasing the prices of cement in various pockets of west and north. Prices have been hiked by Rs 8-10 per bag. Cement will now cost Rs 275 per bag in Mumbai. Cement makers like ACC, Ambuja, Ultratech and Binani informed dealers on price hike.

However, analysts believe that the increase would be good for north based players due to their pricing power, good demand growth and good capacity utilisation.

Rupesh Sankhe, an Analyst at Angel Broking, said, “For north based players, margins will not get impacted but for south based players margins would get impacted over the long to medium term, expecting close to 12 per cent volume growth for north based players and current utilisation. The north based players have pricing power. Their total cost has gone up by Rs 10 per bag due to these measures, so they will get a benefit of Rs 2 per bag.”

Increase in cement prices and expected increase in despatches going forward due to the strong demand, are the double benefits for the cement industry.

Experts opine that due to these, the profitability of cement companies, especially the north based players, would increase.