Cement price remains at elevated level despite stagnant demand

Cement price remains at elevated level despite stagnant demand

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When it started it was region specific, restricted only to Southern markets, but now cement price increase is becoming a pan India phenomenon and spreading to other regions too. In February 2019, cement prices were raised in the Southern market which was seeing good demand due to post floods reconstruction in Kerala and Tamil Nadu, new capital city construction in Andhra and affordable housing and irrigation projects in Telangana and Karnataka. However, quantum of jump in price in South, that is, nearly 10% made one to suspect the sustainability of the price rise. During the last few months not only the prices have been maintained at elevated level  in Southern markets but also it has become broad-based now, spreading to other regions.

North and East led the recent round of price hikes with Rs40-50/bag (12-15% qoq) increase whereas East and Central regions were not far behind with Rs30-35/bag (8-10% qoq) hike in the first quarter of the current financial year. While South prices were up Rs31/bag (9% qoq) in April, it was down Rs8/bag (2% month on month basis) in May after almost 20% cumulative hike in the previous three months.

The strong growth in FY2019 was led by the government’s housing schemes and infrastructure demand. However, in the new financial year demand has remained almost stagnant due to slowdown in government projects, shortage of labour due to excessive heat and elections, and water shortage. However, some dealers are of the opinion that lost growth would be made good in the coming days due to expected extended construction season which will be again due to delayed Monsoon.

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