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Cement demand and price decline in August

Usually, August is the month when Monsoon reaches its peak and covers almost whole of the country. This is also the month when the construction activities touch the lowest level. Though Monsoon this year was not its best during August, cement prices reacted by around 3.5% during the month due to lower demand. As per rail freight data, cement loading in August 2021 rose by 36% YoY, but declined 2.6% MoM.

Price decline was more pronounced in East where it fell by 9% during August. When prices fell in the first half of the month it was expected that it may recover towards the end of the month but expectations were belied and prices fell further in the second half too. Moderated demand amid monsoon impact, lower government spending and sand & stone-chip shortages are cited to be the reasons for price correction. However, in September prices have started rising in the East.

On the other hand, cement demand showed resilience in northern, central & western regions amid weak monsoon & pickup in rural demand. Meanwhile, overall demand was below expectations in the South due to Covid, seasonality impact, and slower construction activities owing to liquidity issue.

Historically too, August is a lean month for cement industry as the demand and consequently the price see decline during the month. But this year, dealers say, decline was slightly higher than earlier years due to sharp price correction in the East and South. However, this decline was partly offset by resilient pricing in the West. Cement manufacturers have announced price hikes of Rs 10-20/bag in the South & East and of Rs 5-10/bag in select markets in other regions, in September 2021.

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