Cement prices surged the most in northern India in Q3. Is there space for more?

Capacity expansions are spread across the north, east and south markets, helping Shree Cement diversify its geographical presence. (Image: Pixabay)
Capacity expansions are spread across the north, east and south markets, helping Shree Cement diversify its geographical presence. (Image: Pixabay)

Summary

  • While realizations of companies focusing on the north may improve to some extent even in Q4, a meaningful year-on-year jump is unlikely

After a lull, trade cement prices at an all India-level are gradually climbing in the recent months. But the recovery in prices is not broad-based. The northern region saw the highest sequential price improvement of 8 per bag in the December quarter (Q3FY25) to 350, according to Nomura Global Markets Research.

In January so far, trade cement price in this market improved by 3 per bag month-on-month to 360, said the Nomura report dated 6 January. In the trade segment, cement is sold by companies to dealers, who in turn sell the product to consumers.

The sequential rise in cement prices would provide an uptick to the realizations of cement companies in Q3FY25 with meaningful exposure to the north. Ambuja Cement Ltd, ACC Ltd, Nuvoco Vistas Corporation, Shree Cement Ltd and UltraTech Cement Ltd are seen as beneficiaries.

Also Read: Cement's growth surge: 50% CAGR projected by 2027 – Are these stocks ready?

“On an average, for cement companies under our coverage realizations are likely to improve by 1.6% sequentially in Q3FY25. But north-focused companies are better placed than many other regions due to sharp price hikes and poised to clock average sequential realizations growth of 2.5% in Q3FY25," said Mangesh Bhadang, senior vice-president, Centrum Broking Ltd.

Cement demand prospects are likely to further improve in a seasonally strong March quarter (Q4) driven by increased government spending on infrastructure projects and ramp-up in construction and home-building activities as peak construction season starts. That, coupled with higher Q3FY25 exit prices, is expected to translate into more price hikes, especially in the north going ahead. “Dealers in the Punjab region expect companies to make another price hike later in the month to 25/bag," added the Nomura report.

Also Read: Beware the excitement on cement price hike

True, the demand-supply dynamics in the north are relatively more favourable. This makes the region less vulnerable to pricing volatility as consumers have so far been able to absorb price hikes. However, note that Q4 also sees cement companies aggressively pushing sales to meet their year-end volume targets and gain market share. This typically keeps steep price hikes at bay. So, while realizations of companies focusing on the north may improve to some more extent even in Q4, a meaningful year-on-year jump is unlikely.

Meanwhile, northern India was followed by the west (see chart), which saw second-best sequential improvement in prices of 6 per bag in Q3FY25. But all-India average trade prices ended the quarter a mere Rs1 per bag higher sequentially at R 337 per bag, dragged by east, central and south regions where prices dropped. Amid elevated competition and capacity additions, this regional price disparity is likely to continue. In CY24, cement stocks fetched mixed returns largely driven by company-specific factors.

Also Read: Cement sector needs lady luck to smile on prices

 

 

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