Cement Prices Dip Over 4% Amid Demand Challenges
Prices across all regions, except the west, have been falling for the past four months.
The average prices of cement across India have declined 4.63% sequentially in the fourth quarter of the current financial year so far.
The decrease in prices for a 50-kg bag has been observed across all regions, according to multiple brokerages' channel checks.
Lower cement prices may impact cement companies, especially if the demand is not strong enough to compensate for the reduced realisations.
Region-Wise Cement Prices
All major regions across India have seen a sequential drop in prices, with the east and south seeing the highest quarter-on-quarter drop of 5.5% and 5.3% respectively.
Price cuts in the south have been sharper for regional brands as dues for government projects have blocked working capital, according to Elara Capital.
Prices across all regions, except the west, have been falling for the past four months. As of February, prices in the east have seen the highest fall of 10% in average cement prices since October.
Prices in the north and south have seen a decrease of 7.7% and 7.4%, respectively, while the central region has seen the least fall of 5.5%.
Demand In Q3
The third quarter saw lower-than-expected volumes across cement companies as November and December saw weak cement demand.
Weak demand was due to the elections in several states, construction ban in the National Capital Region, heavy rain and floods in Tamil Nadu as well as labour unavailability due to the festive season.
Current Demand Scenario
There has been a sequential improvement in cement demand in January and February across most markets, according to Motilal Oswal Financial Services Ltd.
However, certain regional challenges continue to exist. Adverse weather conditions, such as extreme winter in the northern region, the Pongal festival in the southern region, fiscal constraints in some eastern states, and farmer protests in the NCR and Punjab markets have affected sales negatively, it said,
Nevertheless, the brokerage expects an increase in industry volume in the fourth quarter due to robust demand from government-driven infrastructure projects and the peak construction season.
Motilal Oswal estimates industry volume to grow in the mid-single digits of 10–11% quarter-on-quarter in the March quarter and expects an 8–9% year-on-year industry volume growth in the fiscal.
The demand trends indicate that volumes have declined in the low single digits YoY. The lower volumes are due to the high base of last year, sand-related challenges in some states of the eastern region, and extreme winter conditions, according to Emkay Global.
Emkay said its channelcheck indicates low single-digit volumes in the north and south on an annual basis, and mid-single-digit numbers in the east.
The brokerage said recent commentaries from various cement companies indicate that the industry is looking at low single-digit volume growth in the fourth quarter.
