After falling 20% to 30% in the last three months, cement prices have started moving up in western and southern India, thanks to the shortage of railway wagons. Prices in these regions have firmed up in the range of INR 5 to INR 10 for a 50 kg bag in the last one week.
Mr Vinod Juneja MD of Binani Cement said that “There is a sudden shortage of rail wagons for transporting the commodity. Wagons are being diverted to foodgrains and fertilisers. So, now cement players are moving the commodity from the plant to the stockists via road, which is more expensive.”
He was quick to add that the inventory was not yet piling up at the plants. There is a cost difference of 5% to 7% between rail and road transportation.
A couple of industry watchers said the shortage of rail wagons could act as a trigger for hiking cement prices in the long run.
In late 2005, a ban on overloading of trucks had triggered a price hike for the commodity which got further worsened in the next two years due to rising fuel and input costs.
Mr Juneja said that “In western India, however, prices in Gujarat are yet to see a major rise as transportation cost here is low because of proximity to plants.”
An official of a Kutch based cement company claimed on grounds of anonymity that all players would go for increasing prices from December 1 by INR 5 a bag. Prices in the region are now around INR 190 for retail, while the non-trade price is as low as INR 160 in places close to the manufacturing facilities in Gujarat.
Mr Rupesh Sankhe an analyst with Mumbai based Angel Broking claimed that prices were up not because of a demand pull, but entirely because of logistical issues. Mr Sankhe thought that the current surge in prices could be short lived.
Mr Sanjay Ladiwala president of Cement Stockists and Dealers Association felt that this could as well act as a trigger for a turnaround in prices that had seen a sharp fall recently. He however maintained that the wagon shortage cannot be a long term issue to impact prices.
(Sourced from Business Standard)
