Mumbai: As feared, cement prices hikes, which started in April, have failed to sustain. In June, all-India cement prices corrected by ₹7/bag to ₹361, reversing the hike taken in May, showed the dealers channel check by Kotak Institutional Equities Ltd. One cement bag weighs 50 kilograms. Price cuts in June were mainly led by companies operating in South and West with ₹8-11/bag month-on-month correction, the brokerage house said in a report on 18 June.
What’s more, the demand scenario continued to remain sluggish. As per government data, industry volumes increased by 1% year-on-year to 28.7 million tonnes in April. Analysts said cement demand has remained sluggish throughout the June quarter. Demand was impacted by factors including shortage of labour and slowdown in government projects ahead of elections.
Poor demand combined with seasonality factor is likely to keep prices under pressure going ahead.
However, margins of cement manufacturers may see some relief from easing input costs. As per the survey, prices of imported petroleum coke (pet-coke) remains in $95-100/tonne range. Domestic pet coke price at ₹7,600/tonne is down 13% quarter-on-quarter in the June quarter of fiscal year 2020. Further, domestic thermal coal availability has improved post restocking at power plants while international thermal coal prices are down 21% sequentially, said the report.
In short, given the softness in prices of key commodities, variable operating costs for cement manufacturers should remain stable in June quarter. Analysts also expect freight costs to be stable for the June quarter, courtesy flat diesel prices and benefits of higher axle load norms.