After a slight price hike of Rs 2 per bag in April, primarily driven by price recovery in East and South India, cement firms attempted to raise prices in May. However, per a report by Elara Capital, dealers, sales executives and C&F agents said that the cement industry did not achieve any positive price movement, with most markets witnessing a price decline in the range of Rs 0-10 per bag. As a result, all-India average retail price dropped Rs 4 per 50 kg bag month-on-month (MoM) to Rs 356, stated the Elara Capital report.
Additionally, the MoM movement in prices across regions was as follows: prices in Central India were flat MoM, followed by North India down Rs 3 per bag, East India down Rs 4 per bag, West India down Rs 5 per bag and South India down Rs 8 per bag.
Meanwhile, on the demand front, severe heatwave conditions in several markets and the ongoing general elections were key drags on demand. Despite this, recovery was visible in several markets. Most market participants expect demand conditions to improve further in June with the end of elections in the first week of the month. In addition to this, cement firms may attempt price hikes in the range of Rs 10-50 per bag in June, with higher price hikes likely in East India.
Furthermore, prices in Andhra Pradesh and Telangana fell by Rs 5 per bag each while Karnataka, Kerala and Tamil Nadu decreased Rs 10 per bag each. In Maharashtra, price weakness was visible with Mumbai down Rs 5 per bag, followed by Nasik and Nagpur down Rs 10 per bag each. Prices in Bihar and West Bengal saw a decline of Rs 5 per bag each. Jharkhand experienced a higher drop, with prices down by Rs 10 per bag. In North India, prices in Rajasthan and Punjab remain flat MoM but Delhi was down Rs 10 per bag.
Pre-Monsoon price hike likely to be short-lived!
The report highlighted that after muted performance in April and May, attention is now on potential price hikes by the cement industry in June, considering the end of elections in the next few days and the onset of the monsoon. However, with the monsoon likely to start by mid-June, an early June price hike may ensure any price fall during the monsoon happens on a high base.
There is an expected cement demand to decelerate in FY25 on high base, General Elections, and limited hike in cement-intensive capex by the government in the Union Budget of FY25. While sustaining price hikes remain cause for concern, lower fuel prices and focus of most cement firms on cost savings measures may offset any significant negative impact from unfavourable cement prices, said Elara Capital.