Cement prices soar despite flat demand

Indian cement makers seem to have finally succeeded in delinking their price realisations to demand growth. In August this year, cement prices galloped by double digits despite a flat demand, owing to good rains across the country.  On a year-on-year basis, cement despatches during last month increased by a mere 0.3%. The retail prices during the month, however, jumped by over 12% on a national average basis. Prices are up 10-14% in Delhi, Kolkata and Mumbai, and by 4% in Chennai. In Ahmedabad and Jaipur, prices rose 26% year on year, and in Haryana and Punjab, by 4-15%.

Among individual companies, Gujarat Ambuja and Grasim are expected to be the biggest winners. The two companies have a strong distribution and marketing network in west and north India, where the price rise has been the strongest.

The gains of the country’s largest cement maker, ACC, in the north and the west will, however, be moderated by a lower than average price hike in the south.  Over all demand for cement, however, remains weak. According to figures provided by Citigroup’s Smith Barney, in April-August this year, cement makers sold 3.5% more cement than the corresponding period last year.