The Hindu Business Line : Price hurdles for cement resurface in TN

Regulatory hurdles to higher cement prices seem to have resurfaced with the Tamil Nadu Government cautioning private cement companies in the State that they would be nationalised, if prices were not reduced from the current Rs 245-250 per 50 kg bag.

The Government has also said that it would also float a tender to import one-lakh tonne of cement through MMTC to fill the supply shortage in the market.

The imported cement would be distributed to public through State civil supplies at cost price.

Price increase

These directives from the Government follow the increase in cement prices in the southern region.

Price increases have been taken in the backdrop of the tight demand-supply position in this region, backed by increased Government and infrastructure projects.

The State has recorded a strong 18 per cent growth rate in cement demand in the quarter to September (growth rates have been as low as 1 per cent in North); the market price for cement has risen from Rs 230 per bag in November to Rs 245-250 levels currently.

A sharp growth in realisations has expanded profit margins for cement companies in the Southern region in the September quarter of 2007, despite a rise in input costs.

policy intervention

Though a State takeover of cement capacities may not be easily implemented, fresh policy intervention to curb cement prices may adversely impact sentiment towards stocks of players based in this region, especially at a time when input costs are on the ascent.

Stocks of players such as India Cements, Madras Cement, Chettinad Cement and Dalmia Cement may be the ones in the spotlight.