Indian cement prices forecast to fall 1-3%

Cement prices in India are expected to fall by 1-3 per cent in the current fiscal year (April 2023-March 2024), after recording a four per cent compound annual growth rate (CAGR) over the past four fiscal years to a new all-time high of INR391 (US$4.77)/50kg bag, according to CRISIL Market Intelligence and Analytics. The increase in prices was due to disruptions caused by COVID-19, followed by a sharp surge in input costs, especially thermal coal, further aggravated by the Russia-Ukraine war. Now, heightening competitive intensity and softening input costs are set to reverse the trend.

Prices have moderated since early 2023 on the back of a gradual softening of energy costs and efforts by cement producers to gain market share in a seasonally strong fourth quarter. Prices fell around one per cent to INR388/bag on average in the fourth quarter of the last fiscal, despite manufacturers carrying high-cost inventory. On a YoY basis, however, prices have remained elevated.

The heightened competitive intensity can be gauged from the fact that, for the first time in several years, there were no pre-monsoon price hikes in April and May this fiscal year despite steady demand. The push to improve market share is evident from the top five players now accounting for 55 per cent of the volume share compared to 49 per cent pre-COVID-19.

Hetal Gandhi, director of research at CRISIL Market Intelligence and Analytics, said, “CRISIL MI&A Research expects cement demand growth to be strong at 8-10 per cent YoY this fiscal, the pre-election year. This, however, will not propel prices up. On the contrary, prices are set to decline around two per cent YoY to INR382-385/bag, pulled lower also by relatively moderate growth in the trade segment.”

The scenario on the input front also favours lower prices. Australian coal prices declined in the third and fourth quarters of FY23 by around 10 and 36 per cent QoQ, respectively, after hitting multi-year highs in August and September 2022. International petcoke prices have also eased with domestic petcoke prices following suit. Diesel prices are expected to moderate as well in the latter half of the current fiscal as oil marketing companies would have recouped prior losses from cooling crude oil prices.