INDIA: Cement prices firm despite monsoon

Cement prices remain firm despite the arrival of the monsoon as prices have corrected sharply in the recent months and there is very little room left for further correction.

While last year around this time, cement prices in the country on an average was Rs 300 per 50 kg bag, currently it is ruling at around Rs 270 levels.

Analysts said while there will be some correction in prices going forward, this year they will be less as cement companies are already operating at squeezed margins.

“Usually, every year prices starts getting corrected by the end of May as construction activities slowdown with the arrival of monsoon. This year cement prices have corrected sharply before monsoon, which may be late by a week. Cement prices have corrected so sharply that they are selling lower than what it was last year after price correction in the monsoon,” said Ravi Sodah, an analyst at Elara Capital.

A senior official from Cement Manufacturers Association also said that this year cement prices have corrected sharply before monsoon while demand has not yet revived. While cement companies may look at cutting prices from next month, the quantum is likely to be low.

Sharp correction of cement prices has been witnessed in the last couple of months so there is not enough space for further price correction.

Shrenik Gujrathi, an analyst at Angel Broking, said, “Cement prices fell to around Rs 270 per 50-kg bag in the last couple of months compared to the high of around Rs 320 per 50-kg bag. Usually cement prices rise steeply during January to May every year as this is the peak season for cement demand and starts declining in monsoon. This cement prices got corrected during the peak season as demand did not revive. After such sharp price correction, there is very little room left for further decline in prices.”

However, analysts feel that demand is expected to revive from the second half of this financial year as rural economy is expected to perform well with healthy monsoon in the country.

Gujrathi said that healthy monsoon would result is revival in rural economy, which would help in demand revival. Further, infrastructure and construction activities are expected to revive in the second half of the year, further boosting demand.

During the quarterly results, cement companies like ACC, Ambuja, UltraTech and JK Lakshmi Cement had cautioned that the sector will be under stress in the short-term but is likely to witness uptake in demand from the second half of this financial year.