Escalation of cement prices is not an unusual occurrence: Cement Manufacturers
The recent hike in cement prices amid rising demand has made investors take a relook at the sector, which has gone through a rough patch in the recent past. The escalation of cement prices is not an unusual occurrence in Tamil Nadu, cement manufacturers across the State said. They pointed out that in 2015, the price of cement in Chennai went up to ₹415 per bag. And in the last four years, cement prices have not even touched 2015 levels, so it is not right to say that prices have hit the roof, they argued.
According to manufacturers, the share of cement cost is insignificant in the total construction cost. Only half a bag of cement is required per sq. ft. Even if the price increase is ₹30 to ₹40 per bag, its contribution to the construction cost would be only ₹20 per sq. ft, they argue. Last month, cement prices increased by ₹40 a bag on average to ₹357 a bag in the southern market. Many brokerages and independent analysts say the price hike will help improve margins and increase profitability of cement manufacturers over the next two years.
“The recent hike in cement prices will boost operating profit of cement firms at a time when costs are falling and demand is rising,” said a Crisil report. Cement prices rose by Rs 24-25 per 50kg bag in February. The southern region saw the steepest hike, with Hyderabad recording a Rs 77 rise per bag, followed by Rs 62 per bag in Chennai and Rs 52 per bag in Bengaluru.