As pent-up demand fizzles out, cement prices take a beating across most regions1 min read . Updated: 28 Aug 2020, 11:56 AM IST
- Cement industry saw sequential volume recovery losing momentum in August with all-India, excluding-South, average cement prices correcting by 2-3% to ₹366/bag
- Prices remain up 5% YoY due to a sharp 10% month-on-month hike in May 2020
As the support from pent-up demand fades, the sequential volume recovery has lost momentum in August. Consequently, cement prices have corrected across most regions in India. The latest dealers’ channel check by Kotak Institutional Equities showed that all-India, excluding-South, average cement prices corrected by 2-3% to ₹366/bag. One cement bag weighs 50 kilograms.
“Dealers indicate that easing up of the pent-up demand, intermittent regional lockdowns and a severe monsoon have softened demand and impacted prices. However, prices remain up 5% year-on-year (y-o-y) due to a sharp 10% month-on-month hike in May 2020," Kotak report dated 21 August said.
Region wise, cement prices fell the most in the North by ₹10/bag to ₹353/bag, followed by the West and the Central markets. In the East, prices declined the least, by ₹3/bag to ₹338/bag in August, showed the channel check. It should be noted that September is a weak quarter for the sector and cement prices remain muted.
“August is seasonally the weakest month of the year for cement volumes, weighed by heavy monsoon rainfall across most parts of the country. Data for the past 25 years suggests August volumes are 12% lower than the annual average," Motilal Oswal Securities Ltd said in a report on 25 August.
However, this time around, cement prices are expected to remain muted for longer given that demand revival would be prolonged, analysts cautioned.
In the June quarter, the cement sector saw volumes decline around 30-50% on a y-o-y basis. The performance of some south-focused companies was dismal on the volumes front. As per DIPP, demand declined 7% y-o-y in June 2020, recovering sequentially after a decline of 85%/22% in April/May 2020.
The road to recovery for cement demand is a long one. Fading pent-up demand along with slow pick-up in government projects would keep volumes growth subdued.