Markets
Cement price movements in July defy past trend; hikes likely in August
(Hindustan Times)
Summary
- At a time when input cost pressures are easing and demand is anticipated to remain robust in a run-up to the general elections, stable cement prices offer some relief.
Cement prices have not seen a meaningful uptick in recent months even as demand remains robust. And this has been a niggling worry for investors in this sector. But in the good news of sorts, dealers channel checks by brokerages show that cement prices in July have been relatively stable compared to the usual trend seen in the past. Note that July-September quarter is seasonally weak for the sector and prices tend to see a sharp correction on muted construction activity due to the monsoon season.
According to Emkay Global Financial Services Ltd, average cement prices declined marginally by Rs1 per bag on a month-on-month basis at Rs374 in July 2023 versus average price decline of Rs5-7 in the past three-four years. One cement bag weighs 50 kilograms.
“Region-wise, prices have declined by Rs2-3/bag in west and south, Rs6/bag in east, and stood flat in the central region; but, prices improved by Rs6/bag in north on month-on-month basis. In Q2FY24-TD, panIndia average cement prices broadly stood flat on a quarter-on-quarter basis," added the Emkay report dated 4 August.
At a time when input cost pressures are easing and demand is anticipated to remain robust in the run-up to the general elections, stable cement prices offer some relief.
“International petroleum coke prices have moved up ~10% from the recent bottom, reflecting an increase in crude oil prices; however, on a year-on-year and quarter-on-quarter basis, prices remain sharply lower," said a Jefferies India report dated 1 August. International coal prices are mixed recently and sharply lower on a year-on-year and quarter-on-quarter basis. Jefferies analysts expect the full benefit of the energy cost decline till last quarter to reflect in companies' results in the next one-two quarters.
The report further added that cement price trend in July 2023 defied the normal declining trend during monsoons, as prices appear flat to slightly positive month-on-month.
Dealer checks by both the brokerages indicate price hikes likely in August. According to Emkay, price hikes could be to the tune of Rs5-10/bag. It remains to be seen whether these price hikes sustain, especially given the chase for volume growth amid rising competitive pressures and huge capacity additions.
“Notably, like year CY23, in the pre-election year CY18, we saw a similar trend, when cement price rise was below trendline in busy construction season of February-June (as players competed for volumes), and price declines were also below trendline during monsoon months," added the Jefferies India report.
