October 16, 2008

Indian cement makers cut prices

In what would come as a relief to the government engaged in fighting inflation, cement prices have started falling. Significantly, this has come at a time of the year when demand usually peaks and leads to a price hike. Cement makers are reducing prices despite increase in input costs, mainly due to higher supply on account of new installed capacities and the government’s ban on export.

While Shree Cement has reduced prices, others like India’s largest cement maker ACC has decided to freeze its prices for the quarter.

Mr HM Bangur MD of Shree Cement offered no explanation for the price reduction, which has happened despite an increase in the input cost of INR 16 per 50 kilogram bag in a year’s time. Industry sources, however, said that Shree Cement’s decision to cut prices was prompted by its urge to retain its market share given the increase in overall supply.

Mr Sumit Banerjee MD of ACC said that "Responding to concerns expressed by the government, ACC has decided to hold its cement prices over the coming 2 to 3 months." He added that the price freeze will erode the company’s margins.

Meanwhile, Mr RG Bagla executive president of JK Cement Group said that the new capacities, ban on export and increased import from Pakistan have increased supplies in the market. He added that "The period from April to June is considered to be the peak season when prices go up. But it has not happened."