Cement demand remains subdued

Cement demand remains subdued

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As expected, all India demand for cement remained muted in the month of August 2019 due to Monsoon rains and also prevailing liquidity crisis. On all India basis, cement price declined by 2% on month on month basis and almost 5% less as compared to first quarter price.

Price fall was the sharpest in South and the East while it was moderate in other regions. While uncertainty over capital city construction affected the demand in Andhra region, heavy rains affected demand for the commodity in Bengaluru and other regions of the state. Cement prices in Hyderabad region have declined by more than 30% vis-à-vis May prices. On the whole, south saw a price decline of nearly 6% on MoM basis. Sand woes continue to dog the Chennai construction sector which saw 2.8% fall in price on MoM basis.

In East, prices declined by 5% due to lesser construction activities which in turn was due to heavier Monsoon during the month. In Northern belt price was almost stable with price remaining almost at the previous month’s level. Even in Uttar Pradesh and Madhya Pradesh price trend was almost stable with minor variation due to local demand changes. While price remained relatively stable in Ahmedabad region in Mumbai price fell by as much as 8-9% due to Monsoon which played havoc this time.

Going forward, demand is expected to be soft in the second quarter as well on account of the monsoons and a slowdown in infra demand. However, industry majors still expect cement demand to grow by 5-6% during the current fiscal and to achieve this growth number cement demand has to touch double digit in the second half which can happen only if liquidity situation improves considerably in the second half.