Cement prices under pressure as GST, monsoon weaken demand
Cement prices continue to fall as the implementation of GST suppressed demand from both housing and infrastructure projects. This apart, seasonal rains and flooding in most of the large cement-consuming States also impacted demand.
The all-India average cement prices fell by ₹5-20 a bag to ₹300-305 a 50-kg bag last month led by the western and southern region. In the first two months of this quarter, cement prices have declined by four per cent even as cement companies passed on the benefit of lower tax under the GST regime to consumers.
While the demand scenario is likely to remain dismal in the current month owing to festivities and inauspicious (Pitru Paksh) occasion, demand momentum is expected to witness an up-tick in the second half with the revival in rural demand due to favourable monsoon and acceleration in infrastructure development, said Binod Mehta, Research Analyst, Reliance Securities.
Further, he added that the upcoming assembly elections in Gujarat, Madhya Pradesh, Rajasthan and Karnataka in the next 12-18 months will drive demand due to pre-poll spending.
Prices in the northern region including Rajasthan, Jammu and Kashmir, Himachal Pradesh, Punjab, Uttarkhand and Haryana fell for the fourth consecutive month due to monsoon and dealers transition to GST. Average price in these States were down by ₹3-5 per bag to ₹280-285/bag month-on-month. Average price in the southern states of Tamil Nadu, Karnataka, Andhra Pradesh and Kerala dipped by ₹10-12 a bag to ₹330-335 a bag with Andhra Pradesh and Telangana seeing the sharpest fall of ₹20-25 a bag to ₹285-290.
Cement prices in the western region, including Maharshtra, Gujarat and Goa, was down by ₹12-15 a bag to ₹295-300. Cement sales volume in Mumbai region declined by 10-15 per cent as real estate activity slowed down due to heavy downpour and enactment of RERA (Real Estate Regulation Act). Prices in Pune contracted by ₹10-15 a bag to ₹275-280 due to festival and rains leading to low construction activities.