Stock prices of cement companies fall
Stock prices of cement companies fell as a specific reaction to the government move, reports MC Vaijayanthi.india Updated: Jan 23, 2007 23:20 IST
The customs duty cut on portland cement to zero from 12.5 per cent could act as a cap on further price increases, though it may not bring down the domestic cement price immediately, is the informed opinion.
But stock prices of cement companies fell as a specific reaction to the government move. ACC was down 7 per cent to Rs 1,037, Gujarat Ambuja down by 6.7 per cent at Rs 136.90 and India Cements down by 8.76 per cent at Rs 220.65.
In the last one year, cement price per bag had moved up from Rs 160 to Rs 210/230 per bag on the back of buoyant demand. "Expectations have been that cement prices would go up at least by Rs 8 to Rs 10 per bag in the next three months. But now the duty cut has taken away the free hand companies would have had in hiking prices," said Dilip Bhat, director, Prabhudas Liladhar.
February to June is the peak season for the cement offtake and the industry’s inability to hike prices can have a sobering effect. Cement companies though aren’t reacting sharply to the duty cut and maintain that there many not be any drastic move to cut prices. "One has to see the actual impact. It is too early to comment," said the spokesperson with a Mumbai-based manufacturer. "We don’t believe it will help imports. Logistics will not allow it happen and then there is also the issue of countervailing duty," said a senior official with a Cement producer in Chennai.
"Nobody is discussing price cuts now though the industry members can get together and talk in the next few days," he added.
"The threat of import will loom large over the industry though logistics would prevent imports and distribution of imported cement," said Bhat. In case coastal areas feel the heat first and witness a reduction in prices there could be a contagious effect across the country is the fear that has depressed the prices of cement stocks.
Cement production stood at 164 million tonnes as of December 2006 and is estimated to go up to 270 million tonnes in the next three years. Cement consumption had risen 13 per cent in the central region during 2006-07 and 11 per cent in the northern and southern regions. Western region witnessed a growth of 9 per cent.