Cement prices recovered in April but remained lower than the levels typically seen during the summer months, usually a period of brisk construction activity.
All-India cement prices increased by Rs 5 to Rs 326 per bag on a month-on-month basis in April after a sharp decline in the previous month, according to a dealer’s survey conducted by Kotak Institutional Equities. But that’s lower than the levels typically seen in the middle of a busy construction season, especially given rising cost pressures, the brokerage said.
Prices have been volatile since late last year when the introduction of the Real Estate Regulation Act and the Goods and Services Tax hurt real estate demand, slowing down construction. Prices rose in December, signalling an improvement that continued in January and February, but fell again in March as companies focussed on higher volumes.
The recovery in April is mainly on account of price hikes undertaken by western, central and southern regions, Kotak said. All three regions had cut prices in March.
- Prices were hiked by Rs 8 per bag in western India, the biggest increase in eleven months. Maharashtra undertook a hike of Rs 17 per bag while prices declined in both Gujarat and Goa.
- Prices rose to a four-month high in central India.
- The recovery was especially sharp in the south after a stayed an order banning sand mining in Tamil Nadu.
In the north, prices were slashed by Rs 3 per bag after a steep Rs 6 cut in the previous month. Prices in Rajasthan fell by Rs 10 per bag while Punjab and Delhi saw a decline of Rs 5. But prices could recover in the range of Rs 10-15 per bag amid a busy construction season, Banwari Lal Katta, a north India-based dealer and proprietor of Universal Agency told BloombergQuint.
Global financial major JPMorgan downgraded the ratings of two pan India players, ACC and Ambuja Cement Ltd. citing a difficult year ahead for cement companies. Volume expansion has taken a precedence over pricing power for most cement companies, it said in a report.
The lack of pricing discipline in light of continued cost presures will continue to weigh on profitability and the valuation outlook for listed cement stocks in FY19.JPMorgan Report