The cement industry in India is looking at price correction with the all-India average retail price declining by Rs 5 per 50 kg to Rs 391. According to a report by Elara Securities, two major highlights from November that showed early-November price hike attempts in several pockets were followed by reversals, and higher discount offerings by most firms, led to the price corrections.
“As per our channel checks, West India registered the highest MoM fall of Rs 8 per bag, followed by Rs 5 per bag each by Central, East & North India, and Rs 3 per bag by South India. On the demand side, most pockets witnessed MoM moderation in demand hit by festivals, elections in select states, rise in agricultural activities in rural areas, and rains in select parts of South India and pollution-related curbs adversely affecting construction activities in Delhi and the National Capital Region (NCR),” the report stated. However, it added that the end of the festive season and elections in November will lead to demand improvement. This, Elara Securities said, may lead to price hikes in few pockets such as Bihar, Maharashtra, Gujarat and Uttar Pradesh, in the range of Rs 5-15 per bag in December.
Despite the slight price dip, the report said, all-India average price during October-November 2023 continued to be 5.6 per cent better than Q2FY24 average with the sharpest improvement in East India and the lowest in Central India.
Prices across North, Central and East India
A strong October backed by a price uptick has been followed by reversals across North, Central and East India during November. In North India, prices in Delhi, Rajasthan and Punjab fell by Rs 5 per bag each. Similarly, in Central India, prices in Uttar Pradesh and Madhya Pradesh were down Rs 0-5 per bag each. Further, prices across pockets in East India also were down Rs 5 per bag.
Early November price hike attempt fails in South India
After exhibiting a strong price uptick in October, South India has seen a price cut in November in the range of Rs 0-10 per bag. “Our interactions suggest volatile pricing once again has started to haunt South India, as gradual rollbacks post early November price hike attempts of Rs 10-20 per bag were visible. While prices in Kerala were down Rs 10 per bag, Tamil Nadu declined by Rs 5 per bag. However, prices in Karnataka, Andhra Pradesh and Telangana were flat MoM, respectively,” said analysts at Elara Securities.
Prices correction in West India
After witnessing a price increase in the range of Rs 5-25 per bag across pockets in October, cement prices in West India have reported price cuts in November. In Mumbai, Nagpur and Nasik, prices fell by Rs 10 per bag each whereas Gujarat saw a price fall of Rs 5 per bag.
Q3FY24 outlook
Demand prospects for FY24 remained positive, considering strong traction in government-backed projects, led by the General Elections in CY24. This may lead to firms that have added capacity in the past two years to capitalize the most on buoyant demand. “While fuel prices have witnessed an uptrend recently, this negative impact may be offset by the uptick in cement prices in September and October in several markets and benefits of operating leverage,” it said.