Mumbai: The cement sector is seeing early signs of increase in demand after a short-lived decline following the government’s demonetisation drive, according to companies and analysts. The prices of the commodity are also seen rising, they added.
Construction activity in the country is increasing owing to a boost from infrastructure development and the government’s push, said H.M. Bangur, managing director of Shree Cement Ltd. Marginal improvement in demand is beginning to surface due to a rise in construction activity, said Shailendra Chouksey, whole-time director at JK Lakshmi Cement Ltd.
“After considerable slippage of prices post demonetisation, right up to the first week of February when the demand of cement had also gone down considerably, we had gone for a partial price increase in the first week of February and again to some extent in the first week of March," said Chouksey.
However, further hikes may be needed to fully correct the fall in cement prices, Chouksey said. “Prices are still much below than what prevailed in September-October," he said.
India’s cement sector witnessed a decline of 13% year-on-year in production volume in January—its first such decline since January 2001, Mint reported on 6 March. Still, cement makers have survived the demonetisation shock quicker than expected.
“Cement demand is picking up and price hikes will also happen as current prices are still lower than what they were at the end of October (pre-demonetisation). We see price hikes taking place in the next 10-15 days except in South region, where prices had not fallen to the extent of other regions," said an analyst, asking not to be named as he is not authorised to speak to the media.
February-March is typically the season for price hikes in cement as construction activity rises, this analyst said.
The north and central regions have witnessed a price hike of Rs10-30 per bag across most markets starting February and in March, supported by improvement in demand, according to a report by Antique Stock Broking Ltd.
“In West, prices in Gujarat have finally started to move up after a lull of 6-7 months. Price hikes are higher in non trade segment. In Maharashtra, price trends have been volatile, with part of the recent hikes getting reversed. East India continues to present the most competitive picture in terms of pricing environment, with some improvement seen in February led by Bihar market," the brokerage said in a 10 March report.
In Delhi, non-trade segment prices inched up closer to Rs300 per bag in March after having fallen to Rs260-265 per bag in the past months, the Antique report said. Similarly, prices in Gujarat and Central India have also risen by Rs20-30 and Rs10-30 a unit, respectively, in recent weeks.
Cement prices are up marginally but demand is yet to improve significantly, Nirmal Bang had said in an 8 March report, after channel checks with dealers across cities.