BackCement demand in Q2 revives across India, excluding south
Improving labour availability and festival demand from individual home building segment are aiding growth
Premium(Hindustan Times)
After a washout June quarter, cement demand in the September quarter revived in most regions. Latest dealers channel checks by brokerages show that cement demand improved in the northern, central and eastern India. South and some markets of western India were the exceptions. Improving labour availability and festival demand from the individual home building segment are aiding demand growth. The demand scenario in semi-rural and rural regions was better than that in urban areas.
“As per feedback from dealers in north, labour has started coming back (40%+ as per our rural channel checks in September 2020) and hence they are seeing an uptick in volumes. Checks with large project companies suggest the availability of labour at project sites has improved to around 80% of the normal levels," JM Financial Institutional Securities Ltd said in a note. Demand recovery in south was impacted by stricter lockdowns, especially in Tamil Nadu and Kerala. Dealers indicated that this region is still facing a shortage of labour.
South-based companies, including Ramco Cement Ltd and India Cements Ltd would see steep volume declines in the September quarter. On the other hand, volumes of pan-India companies ACC Ltd, Ambuja Cements Ltd, and Ultratech Cements would grow in the 6-10% range year-on-year. Other regional firms may also report decent sales growth in the second quarter, analysts said.
Domestic brokerage Motilal Oswal Financial Services Ltd estimates the cement industry volumes to have grown 3% y-o-y. On a sequential basis, the sector’s volumes are anticipated to have risen 33% in Q2.
As for cement prices, seasonal weakness weighed on price movements in Q2. “Prices fell sequentially (3–5%) across regions in Q2FY21 on account of seasonally lower demand, but have remained 3% higher y-o-y on a pan-India basis (at ₹358/bag). Prices in the south have been particularly strong and were up 13% y-o-y (-2% q-o-q) as per our checks," said Motilal Oswal in a report. One cement bag weighs 50 kg. Due to strict pricing discipline followed by South-based cement makers, prices weren’t impacted by subdued demand, analysts said.
Meanwhile, operating costs for the sector inched higher in Q2 on the back of rising prices of petroleum coke and coal.
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