Cement Prices Decline In Seasonally Strong Quarter

Cement Prices Decline In Seasonally Strong Quarter
19/01/2021 , by , in ALLIED

Cement prices across India corrected in January despite the ongoing demand recovery. The latest dealers channel check by Kotak Institutional Equities showed that on a pan-India basis prices fell by around 2% month-on-month (m-o-m) or by Rs 9/bag. One cement bag, which weighs 50 kg, costs Rs344 at present.

The price correction, ahead of a pick up in construction activity, is unseasonal based on historic trends. Historically, prices start inching up in January ahead of peak construction activity. 

Region wise, prices in the north and central markets saw a moderate fall partially impacted by extreme winters and the disruption led by farmer protests. 

Further, prices declined by 5% m-o-m in the south because of adverse weather conditions led by cyclones and demand pushback from infrastructure projects as a fallout of high prices. Prices in the west moderated by 2% m-o-m because of higher inter-regional movement. 

In the east, prices hit a five-year low with 2% m-o-m correction.

Recently many big cement makers have announced fresh capacity expansions with focus on capturing the east market. However, with demand improving only moderately compared to the supply, prices were expected to take a knock.

Apart from that, some cement companies are being investigated by the Competition Commission of India over allegations of cartelisation. As such, many analysts had anticipated that cement companies are unlikely to resort to massive hikes. Meanwhile, in the wake of rising input costs, a fall in prices point to weaker realisations and compressed margins for cement makers. If cement prices fail to reverse in February and March, it would come as downside risk to the sector’s earnings.

 

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