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Cement pricing disagreements and capacity expansion in India

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World Cement,

Cement prices continue to cause disagreements

In spite of the impact of the cement boycott imposed by builders, cement producers in Adhra Pradesh and Telangana are reportedly reluctant to reduce cement prices. The Deccan Chronicle is reporting that two rounds of talks between state government and cement producers have failed to reach an agreement – in fact, cement prices have allegedly increased by Rs.10 per bag in the last two weeks. The state government is reportedly turning to the Centre to intervene, since the construction industry has come to a stand still over the disagreement.

The cement producers argue that the price rises bring prices in line with other states. Meanwhile, the boycott has reportedly been extended to 24 July.

Elsewhere in Telangana, India’s newest state, the Chairman of the CK Birla Group has met with the Chief Minister to confirm his interest in expanding his healthcare and cement businesses in the state. The Group currently has two industrial units in Telangana. Reports indicate that the proposal was met favourably by the Chief Minister, who intends to develop an industry-friendly policy.

Cement capacity expansion in the north

Further north, cement producers are anticipating strong demand following the government’s announcement that it plans to build dedicated freight corridors and 100 ‘smart cities’. Companies including Jaypee Cement, JK Cement Ltd, Mangalam Cement, Birla Corporation, Ambuja Cements, Shree Cement, UltraTech Cement and India Cements are all reported to be looking into capacity expansions, but it is thought that limestone reserves in the region are insufficient for such plans to be realised. The north of India reportedly has only 16% of India’s total limestone resources. Instead, it is likely that expansion will be via acquisitions.

A report by Barclays Research in May claimed that North India would see capacity additions of 23 million t. The report stated: ‘We expect a further consolidation to take place due to high entry barriers and the addition of 58.6% of the regional capacity by the top five companies between fiscal 2014 and 2017’. Rajesh Kumar Ravi, an analyst at Karvy Stock Broking Ltd, agreed: “Consolidation is the only way for the industry to move forward; it cannot work in a fragmented manner…”

Edited from various sources by

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