Cement Prices Stay Muted

Cement Prices Stay Muted
18/07/2020 , by , in ALLIED

Latest dealers’ channel check by Kotak Institutional Equities (KIE) Ltd, showed that all-India cement prices declined by 1% to Rs366/bag in July. One cement bag weighs 50 kilogram. This was on the back of easing supply-side constraints and moderating demand with pick-up in monsoon across India.

Region-wise, price cuts in July were pan-India barring Central and Western India. Prices in the South declined 1% month-on-month (m-o-m) after a sharp 19% hike in May. Prices fell in North, and East markets by 2%/1% m-o-m, while prices in West and Central India remained resilient, despite poor demand. Historically, cement prices corrected by nearly 2% quarter-on-quarter in the September quarter due to seasonality, said the KIE report published on 17 July.

As per government data, cement demand declined 22% on a year-on-year basis for May 2020. KIE’s checks suggest that demand recovery is weakest in South and West and strongest in East and Centre, this is similar to the trend reflected in MGNREGA data. MGNREGA is short for Mahatma Gandhi National Rural Employment Guarantee Act. In a bid to boost employment opportunities for migrants in rural areas, the government has increased its focus on various employment schemes.

The cement sector is expected to post a steep decline in volumes in the June quarter. Companies having higher exposure to the South and West India, would be the worst hit in terms of volumes. Operating costs are likely to remain stable on benign raw material costs.

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