For the common people and real estate developers who are dreaming of building their own house, news is coming which will be heavy on their pockets during the festive season. According to the latest reports from leading brokerages and research firms (especially Emkay Research and industry analysts), the country's major cement manufacturing companies are set to increase cement prices by ₹10 to ₹15 per sack (50 kg bag) from mid-October (around October 15). If this price increase is implemented across the country, the average price of cement in the retail market may increase from ₹360 to ₹375 to ₹390 per bag, which will directly impact the overall budget of house construction and renovation.
According to cement industry experts, this possible increase is being done to save the profits of the companies, as input costs have been continuously increasing for the last 6 to 7 months:
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Rise in prices of petcoke and imported coal: The cost of power and fuel in cement production is about 30 to 35 percent of the total production cost. The rise in the rates of petroleum coke (Petcoke) and imported coal in the international market has increased the production cost from ₹300 to ₹400 per tonne.
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Crude oil surge and logistics expenses: Due to strong international crude oil prices, there has been a significant increase in freight/logistics costs. Cement being a heavy and bulk material, the diesel expense of transporting it from the factory to the dealer directly puts pressure on margins.
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Margin decline in quarterly results: In the second quarter (Q2) of the financial year, a gradual decline of ₹ 200 to ₹ 250 in the per tonne earnings of the companies is estimated, to balance which the companies are taking the help of demand from construction activities in the festive season.
In the construction of a typical 1,000 square feet house (Ground Floor), on an average 350 to 450 bags of cement is consumed from foundation to slab casting:
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Direct Additional Expenses: If there is an increase of ₹15 per bag, there will be a direct additional financial burden of about ₹6,000 on cement alone on 400 bags.
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Impact on multi-storey and big projects: In large residential and commercial projects where thousands of bags are consumed, the total project cost will increase by lakhs of rupees, the ultimate impact of which can be seen on the prices of flats per square feet.
According to dealer sources, companies can implement the new invoice rates in a phased manner in different zones (North, Central, West and South Zone) from October 15 onwards. However, after the end of monsoon, construction work in infrastructure and highway projects has picked up pace, due to which demand remains strong. Experts believe that how much companies are able to sustain the increased prices in the market will depend on the strength of demand in the coming weeks. People who are constructing houses are being advised to consider booking their cement requirement from local authorized dealers before the price increases.