Cement majors wage price war in the east
The Economic Times — December 11, 2001

The fight for marketshare, industry observers say, has gained momentum following the recent consolidation in the industry. Grasim Industries is emerging as a key player in the region along with Larsen and Toubro, which is augmenting its presence in the region with a 10-lakh-tonne (lt) grinding unit at Durgapur. Lafarge, say rivals, has been aggressively pushing up volumes to retain its number-one slot and to ensure that it does not get marginalised by the local biggies.

The Grasim-L&T duo now controls over 20 per cent in the eastern region, while the Gujarat Ambuja-ACC combine is ahead with around 24 per cent. Lafarge is however the single largest player in the region, with a marketshare of close to 23 per cent.

Said a Gujarat Ambuja official: “It is unfortunate that Lafarge has been aggressively trying to pump up marketshare, thereby disturbing the market equilibrium.

"Prices have nosedived and all manufacturers are today feeling the heat. We (the manufacturers) are in discussions and hope that the situation improves sooner rather than later.”

The eastern region — comprising states like West Bengal, Bihar, Jharkhand, Orissa and the four north-eastern states — consumes around 160 lt of cement annually. Industry sources say that the current price war was triggered following a tussle between Lafarge, which operates only in the east, with a capacity of around 50 lt, and the BK Birla-controlled Century Textiles, which has been trying to explore the eastern market.

To stave off competition, Lafarge apparently went on the offensive and stepped up cement dispatches to unprecedented levels. Prices were the natural casualty as they fell by around Rs 20-25 per bag in recent weeks to just around Rs 120 per bag.

Sources close to Lafarge, however, deny the role of the French major in the current price turmoil. “Lafarge is the largest player in the region and does not gain if cement prices are depressed," he said.

"Besides, with the other local manufacturers controlling about 75 per cent marketshare, the talks about Lafarge bringing down prices do not hold water,” said sources.

‘Swadeshi’ manufacturers, however, say that the step-up in Lafarge’s dispatches has coincided with the visit of its worldwide chairman and CEO, Berland Colomb. “It is possibly their way of telling the global head that things are good here,” said a senior official with a rival cement manufacturer.

Lafarge’s dispatches in October rose to 3.6 lt, as against 2.4 lt in the previous month, and industry sources believe that its November volumes would rise further. In November, industry shipments to the region rose marginally from 12.6 lt to 14 lt.

However there are others who see different reasons, “With their financial year coming to an end later this month, the company must be looking at ways to shore up volumes. Besides, there has been a problem of stocks that are being cleared by many manufacturers. Although prices are depressed right now, we expect things to get corrected over a period of time,” said an L&T official.