Sudden fall in cement consumption in Andhra Pradesh has resulted in the retail price declining by about Rs 15 to Rs 20 per bag in the state.
With no immediate signs of possible revival in demand, the cement companies have resorted to despatches strictly based on dealer orders to maintain a reasonable demand-supply position. Some dealers even accuse the manufacturers of attempts to create an artificial shortage in the market by withholding despa-tches in a bid to shore up the falling prices.
According to dealers, cement is today available at Rs 140 to 145 per bag depending upon the brand as against Rs 160 to 165 a bag two weeks ago.
According to officials in the cement industry, the present sluggish situation is expected to continue for some more weeks as the political atmosphere is fast changing in the state — especially after the news of advancement of Parliament elections which has temporarily brought state government spending on various projects to an halt.
The cement industry maintains that Rs 160 to 165 per bag is the breakeven level for most of the companies in the state while the builders constantly demand price reduction as the project cost prepared based on old prices would render most projects unviable.
Cement industry’s calculation of a seven to eight per cent growth in cement consumption looks like a pipe dream as most of these projects have slowed down.
They now have the limited housing market to push their products.
With supply far exceeding the demand, it is becoming increasingly difficult for the manufacturers to maintain prices at higher level thus forcing them to cut supply to match demand, an industry analyst said.
With Andhra Pradesh being a cement surplus states it is very important for the manufacturers to maintain a price which acts as a deterrant for the product from moving into the neighbouring states such as Tamil Nadu, Kerala and Karnataka. Inflow of cement from Andhra Pradesh pushes the price down in these states as well.