Bad weather, labour shortage affects construction

Bad weather, labour shortage affects construction

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The last two weeks of May were bad for cement industry as the cement prices declined by 0.6% due to severe weather conditions and acute shortage of labour. Construction activity also affected due to slow release of payments by the government to the contractors in some states like Telangana.

Though price hike of Rs 10/bag was announced in Rajasthan, construction activity is still suffering in the state due to shortage of sand. Overall, Northern region saw a decline in cement price by Rs 3/bag during the month. Acute shortage of labour was also felt and at some places workers were demanding 50% hike in wages. Dealers in the region don’t expect much improvement in the demand scenario in the immediate future and hence no increase in price from the current level is anticipated.

Southern market in general saw a decline in price with Hyderabad witnessing steepest decline. With Shree Cement set to commence its operations in July in Gulbarga unit which is in Karnataka but closer to Hyderabad market, price is unlikely to see an increase in the next few months. Assembly elections in Karnataka affected the demand in the state and as a result price dropped a little. Severe weather condition in Tamil Nadu affected construction activity in the state which in turn affected cement demand.

On the Eastern side, cement demand in Bihar continues to grow, though the price increase of first two weeks of May had to be reversed in the following two months. Odisha too witnessed robust growth in demand and price was hiked twice, Rs 5/bag each, during the month. In the next one year five grinding units are going to commence their operations in Odisha.

Though price on the Western region surprisingly remained stable during May, dealers are sceptical about the situation and expect easing of price with the onset of Monsoon. Again, labour shortage affected construction in Gujarat and in-turn demand for cement too remained subdued.

In Central region price remained stable, though construction was affected by bad weather. 

Cement offtake was, however, good on YoY basis due to low base effect. Remember, last year during the same period cement demand was struggling to recover from the after effects of demonetisation.