BQ Survey | Cement Prices Rise For The Second Straight Month In February

All-India average cement prices for a 50-kg bag increased by Rs 9 month-on-month in February to Rs 349, according to 14 dealers surveyed by BloombergQuint. All the regions, except the north, witnessed an increase.

Higher prices for the second straight month suggest cement makers are slowly regaining pricing power. The sector, along with other high-frequency indicators such as services and manufacturing activity, suggests a nascent recovery from the worst growth slump in more than a decade in the last two months.

India’s GDP grew as-expected at 4.7 percent in October-December and the pace was revised upwards for the preceding quarter. The global coronavirus outbreak, however, threatens to stall the rebound.

For cement makers, South India saw the biggest jump in prices. Dealers, however, expect a limited upside in the region that, India Cements Ltd. estimates, contributes more than a third of the output. Chances of further price hikes remain bright in the west because of construction activity in Gujarat and Maharashtra.

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South

Cement makers in the southern region raised prices in February, paring all the declines seen since October 2019. Andhra Pradesh and Telangana witnessed a sharp price hike of Rs 20-30 per bag during the month. Demand offtake in other parts of the region, however, continued to disappoint as dealer checks suggested lower sales.

Overall, prices in the region rose Rs 20 per bag to Rs 335.

West

Cement producers in the region also hiked prices with the resumption in construction activity after Maharashtra state elections and improved credit availability, according to two dealers surveyed by BloombergQuint. In the second consecutive monthly jump, companies increased prices by Rs 12 in February to Rs 332 a bag.

East

Cement prices in the region rose as much as Rs 8 per bag in February to Rs 320 a bag, according to three dealers surveyed by BloombergQuint.

North

Cement producers in the region hiked prices by Rs 6 a bag but soon rolled it back after they failed to sustain rates at these levels due to weak demand, according to three dealers surveyed by Bloomberg Quint. Shortage of labour due to the wedding season and upcoming Holi led to subdued construction activity, two of them said.

The average price of a 50-kg bag in the region stood at Rs 358.

Central India

Prices of cement in the region rose Rs 5 a bag to Rs 370 in February, according to two dealers surveyed by BloombergQuint. Limited capacity addition has kept the region relatively insulated from the slowdown, they said.

Outlook

According to a Kotak Institutional Equities’ report, cement makers expect the demand to recover over the previous quarter in January-March with improving weather conditions and resumption of various government projects. But it’s unlikely to rise on a yearly basis because of a high base, it said.