Northern India prices rebound as demand strengthens

Cement prices in northern India have risen by around 25 per cent YoY in the period April-July 2016, driven by rising demand, according to the Economic Times.

This performance stands in contrast to other regions, where prices have either remained stable or fallen slightly. In the north, prices stood at INR305-345/bag (US$4.55-5.14), up on the same period last year and also higher than the INR225-240 seen in January 2016.

Sabyasachi Majumdar, senior vice president, ICRA Ratings, said, “While the production growth during April-May 2016 was lower at 3.4 per cent when compared to the 9-13.5 per cent growth reported during Q4 FY2016, the demand has picked up in June 2016 and the production increased by 10.4 per cent when compared to June 2015.

“During June 2016, demand improved in the North, driven by a demand pick up in Uttar Pradesh where there is increased Government spending on infrastructure and irrigation projects. The decline in the demand growth during April-May 2016 has been primarily due to the continued weak rural demand (especially in Maharashtra, which is facing a drought) and slowdown in the pace of infrastructure execution, due to the unavailability of water.

“Demand growth during FY2017 is likely to be driven by the pick-up in the infrastructure segment, primarily road projects and the housing segment during the next one year; this apart, there is a likelihood of a recovery in the rural demand from H2 FY2017, given the expectations of a better monsoon.

“With the pace of new capacity addition slowing down we expect capacity utilisation and the supply-demand scenario to record an improvement, especially in FY2018, which should support cement prices and profitability indicators for cement manufacturers.”

In other regions, Hyderabad saw prices fall by INR45 YoY, to around INR290/bag, while Chennai and Bangalore were stable at INR375-395/bag and INR340-370/bag, respectively. Prices in the west remained stable at INR2607-270/bag, while in the east prices were down around 10 per cent at INR320/bag.

Overall, cement production for 1QFY2017 was up by 5.7 per cent YoY to stand at 75.6Mt. This represents a quickening of output growth when compared to the 4.6 per cent recorded in the same period in FY2016.