If cement manufacturers have hiked the prices of commodity in the first week of the New Year, its not without reasons. According to some cement manufacturers, after initial phase of sluggish demand during the first half of the current financial year, some greenshoots seem to have emerged from November-2020 onwards indicating a revival of demand.
Cement manufacturers believe that the sluggish demand in the first half was due to slowdown in real estate and infrastructure execution due to financial strain, extended monsoons, and central/state elections. However, some green-shoots seem to have emerged as November 2019 month witnessed 4% YoY cement volume growth (at Pan-India level) despite a high base in the corresponding month last year.
In tandem with demand price too moved southwards last year – from the peak of Rs 370/bag to Rs 340/bag. With greenshoots visible, the cement manufacturers like Utratech and Shree Cements have decided to raise the price in January which other blindly followed.
For example, in Eastern markets volume growth has turned around from low single-digit growth in the past few months to 16%/18% YoY growth in November and December. While West Bengal and Odisha saw above 20% growth, other states (except Chhattisgarh) too saw double digit growth. They expect this growth trend to continue in the last quarter too.
As a result, cement prices in East India which have been falling sequentially for the past 8 months have shown uptick with a hike of Rs 15-25/bag in January. This hike has been taken by all players in the region including market leaders Ultratech and Dalmia cement.
However, some experts are quick to point out that a similar price hike was incurred during December-2019 but was later rolled back as all the players did not get onboard with the hike. However, this time price hike is across board and less likely to be rolled back, especially if the demand picks up.