The top four cement manufacturers in the country have started taking steps to tackle an expected slide in demand due to the monsoon.
The cement prices are expected to fall by Rs10 per bag in July.
To begin with, companies like ACC, Ambuja, Grasim, Ultratech and few others are likely to reduce the supply of cement bags in the wholesale and retail markets.
According to Cement Manufacturers Association, the demand for cement had been falling in every monsoon - between July and September - as construction projects are put on hold.
Sanjeev Bafna, joint president & deputy CFO, Grasim Industries, said: "We don’t have any idea of any such move of reducing cement supply to the market." He declined to comment anything about pricing.
Analysts said reducing supply to the market is a move to maintain the high prices of the commodity. Moreover, there would be around 30% decline in demand across the country during the monsoon season.
A CARE research report said with monsoon picking up, construction activities will witness sluggishness. Moreover, import of cement in monsoon might not be possible and in turn cement import might not happen before the month of September.
Even cement prices are also unlikely to hold firm as smaller players are adding capacities at a much faster rate than the top five players. Slowing down of the consolidation process may make it difficult for the pricing discipline to be sustained.
A tight demand-supply situation in the domestic cement market has driven cement prices to historic high levels over the past two years. Driven by the strong prices, profitability of cement companies has also increased significantly.
Recently, brokerage firm SSKI maintained underweight stance on the sector and its rating on Ambuja, ACC and Ultratech as underperformer. Apprehension over a slowdown in demand growth, forthcoming monsoon season and possibility of increase in import came to the fore and had a short-term negative impact on the valuation perception.