Cement Industry Gets Back Its Pricing Power. Is It Here To Stay?
Cement industry seems to be getting back its pricing power as prices jumped for the second straight month in February, according to a BloombergQuint survey of dealers.
Prices rose the most in the south, followed by the nation's western and central regions, the survey—covering 14 dealers in five regions—revealed. Prices remained stable in east and north India.
A pick-up in infrastructure activity in the ongoing quarter as well as price increases by pan-India players like ACC Ltd. and Ambuja Cements Ltd. provided room to most of the cement makers, according to dealers.
The rebound in prices in the last two months came after five months of decline because of lack of demand in the absence of fresh orders ahead of the general election and excess supply. The prices are now expected to go up further until June-July, Sanjay Ladiwala, a market expert, said. It is the remunerative pricing of the South-based players which lead to an uptick across India as they would not be dumping excess inventory in other regions, he said.
Biggest Hike In The South In At least A Year
South-based cement makers raised prices by Rs 50 per bag in February, the biggest hike in at least a year, after six consecutive months of decline. The average price in February was Rs 360. Prices in the region had fallen by more than Rs 30 a bag since February last year.
But it will be difficult to sustain these price levels, according to Rajeev CM, a dealer from Calicut. Excessive supply from Tamil Nadu and lacklustre demand could lead to a possible correction in the region, he said.
Cement prices rose by Rs 10 a bag each in western and central regions. No region saw a cut.
Dealers from the east expect a possible hike of Rs 10 a bag in March as the prices have remained flat at around Rs 331 for a 50-kg bag. Meanwhile, prices remained flat in the north, which saw an increase of Rs 5 per bag for in January, in the absence of any improvement in demand.
Steepest Hike In The West In Nine Months
In the western region, prices rose in Ahmedabad, Vadodara, Surat and Mumbai, according to the survey. The average price in the west was at Rs 314 per bag in February.
Central Region Undertakes Hike For Second Consecutive Month
The increase in the central region was the highest in seven months, driven by the Holcim group, said a dealer from Bhopal. The average price in central India was at Rs 340 for a 50-kg bag.