India: cement prices falling pre-monsoon

India: cement prices falling pre-monsoon
04 May 2012

Apart from in eastern India, cement prices are on a downward spiral across the country, suggesting the monsoon-time weak cycle has set in early this year.

Dealers and industry sources said prices have corrected in the range of INR5-15/bag, or around 2%, of late as supply outstripped demand.

The earlier price uptrend since February corrected from INR314-308/bag (US$5.80-5.70) in mid- to end-April. A cement dealer from Delhi said, “Demand from construction activity has been low. The most recent price cut was INR3/bag, with current price at INR265/bag.”

Price cuts are likely to continue. There is limited scope for a price rise as construction activity slows down during the monsoon quarter beginning May-end or early June, said dealers.

In a paper based on Indian Reality Research, CLSA analysts Amit Bhandari and Neha Johari wrote: “67% of the dealers have reported a decline in prices. They expect a further weakness in price as inventory piles up. Overall in India, the average price of cement has decreased by 2% per bag since 15 April.”

The eastern region has been an exception though. Prices stayed flat but with no further room for a rise. In the north, in the last two weeks of April, prices declined by INR8/bag to reach INR294/bag by April-end. In the west, the correction was up to INR15/bag in the second half of April.

However, starting 1 May, cement companies attempted a rollback of INR12/bag in some markets, pushing the price to around INR298/bag. But dealers remain sceptical. “Prices fell by INR15/bag last month.

Starting Tuesday, prices have been increased by INR12/bag. But it would be difficult for the market to sustain this hike as demand remains low,” said a Gujarat-based cement dealer.

The south has also seen a huge price cut of about INR14/bag. “Cement prices have been highly volatile in the past one month. First, there were price cuts, then a rollback. But demand has not been supportive,” said a Hyderabad-based cement dealer.

Local prices are around INR270/bag, making Hyderabad the weakest market in southern India.

The CLSA note points to a correction of INR7/bag in the east as well. However, dealers and industry sources maintained that prices have remained firm in the region. “Prices currently are at INR350/bag, with an increase of INR10/bag last month. There is not much scope for any further hike than this. Prices should remain at this level or correct hereon,” said a Kolkata-based dealer.

Published under Cement News

Tagged Under: Prices India