Indian cement prices dip on weak demand

Indian cement prices dip on weak demand
Published: 15 June 2011

Hopes of revival in cement prices ahead of the monsoon have been dashed with top dealers reporting a decline of INR5-10/50kg across regions during the last fortnight, as there was no turnaround in demand either from the infrastructure or real-estate sectors.

Cement companies in their race to hold market share have been offering special discounts to big dealers and created a glut in the market, resulting in the current drop in prices, said one dealer.

The western region, including Maharashtra, Gujarat and Goa which were holding strong until recently, have started declinin. Prices in Mumbai were down INR5/bag while Gujarat witnessed a drop of INR10-15/bag due to weak demand ahead of monsoon. Though the average price in the western region at INR265/bag in the June quarter may work out to lower by about INR11/bag sequentially, they may still end up lower by about INR 17 YoY, said Mr Ajit Motwani, Research Analayst, Emkay Global Financial Services.

The average cement prices in the northern region were down INR14 to INR275 owing to sharp fall in demand. The June quarter prices in the region are still up Rs 10 a bag compared to last fiscal.

“Though cement prices are higher compared to last year, a clear trend on the cement companies’ profitability will emerge only after factoring in their production numbers. They had incurred a huge cost push due to rise in raw material prices and interest cost has also gone up substantially in last one year,” said an analyst.

Reflecting the sustained weakness in the southern region, cement prices in Hyderabad dipped by INR10-15/bag. However average price of INR280 in the region was down just INR3 a bag sequentially. Demand failed to revive after the Assembly elections. Shortage of labour hampered construction in the eastern region, thus pulling down cement prices by INR6-15 to INR242.

Prices in the central region were down 27 a bag to INR245. The region saw a price drop of INR5-15 a bag. However, dealers in this region suggest that prices might have bottomed out with lesser chances of any further price cuts.