India is celebrating the onset of early monsoon, but the cement sector may not have too many reasons to rejoice. Elara Capital called for cautious approach on the near-term cement price outlook. They believe that the early monsoon in select regions may disrupt construction, dent demand, and prices are likely to remain rangebound or decline further in June.
Not only this, the industry is also facing rising cost pressures, led by lag impact of elevated petcoke prices and an increase in limestone royalty. “We believe cement spread is nearing its short-term peak,” Elara Capital added.
Cement demand likely to see a dip in June
According to market participants, initiatives to hike prices have largely failed. Particularly in South India, prices are already started retreating from April peaks. With the monsoon now active in states like Kerala, Karnataka, Maharashtra, and Delhi-NCR, further pressure on demand and prices are expected in June. Companies typically prioritize volume targets and price stability in a challenging environment.
Earlier this week, the IMD reiterated its earlier forecast of ‘above normal’ monsoon rainfall during June-September this year, but said June might see “excess” rainfall. There are also 90 per cent chances of the rains being in the “normal-to-excess” range through the four-month (June-September) season.
Average cement price up Rs 2 per 50kg bag in May
Cement prices took a breather in May after a significant increase in April. Except for South India, most regions saw stable prices or a modest increase. Consequently, the all-India average retail cement price rose by Rs 2 per 50 kg bag month-on-month to Rs 379. This is the highest level since December 2023.
Specifically in terms of regions, East India recorded the sharpest rise of Rs 8 per bag, followed by Central India at Rs 2 and North India at Re 1. Contrary to this, South India witnessed a decline of Rs 4 per bag while prices in West India remained unchanged month-on-month.
Early monsoon weighs on cement demand
Construction activity is expected to stay low in the upcoming weeks as a result of the heavy monsoon forecast by IMD. This is expected to keep cement prices rangebound or they may even decline further in June. Cement companies, Elara Capital said, are now focused on maintaining current prices despite the seasonal slowdown and pressure to meet quarterly sales targets.
Cement Price check across regions
Central, East, and North India displayed mixed trends in cement prices during the month of May. Data collated by Elara Capital stated that in Central India, Madhya Pradesh saw a price increase of Rs 5 per bag, while Uttar Pradesh remained flat MoM. In the East, after a positive rise in April, May also saw strong performance. Except for Chhattisgarh, where prices stayed flat, most states—Bihar, Jharkhand, Odisha, and West Bengal—saw a price increase of Rs 10 per bag. In the North, Rajasthan saw a small rise of Rs 5 per bag, while prices in Delhi and Punjab remained unchanged.
In South India, after a sharp Rs 41 per bag price hike in April, the market struggled to sustain the increase, leading to weaker prices in May. Prices were flat or declined, with the biggest drop of up to Rs 10 per bag in Andhra Pradesh and Telangana. Prices remained stable in Karnataka, Tamil Nadu, and Kerala.
In West India, cement prices in Gujarat stayed flat in May with no increase. In Maharashtra, early attempts to raise prices did not hold, leading to a reversal. As a result, prices in Mumbai, Nasik, and Nagpur remained unchanged in May.