Companies

Bharat drives cement sector’s volume recovery in June

G Balachandar Chennai | Updated on July 08, 2020 Published on July 08, 2020

Analysts say that cement consumption and prices moved northwards during June on a month-on-month basis   -  THE HINDU

Pent-up demand from rural and semi-urban centres has been driving sales of cement

The cement industry is reported to have witnessed a good offtake, including some strong positive growth in certain regions during June.

While the final details are awaited for the month, the initial feedback from industry representatives and analysts indicates that cement consumption and prices moved northwards during June on a month-on-month basis.

“Volume offtake was definitely much better in June when compared with May. But it is still lower on a year-on-year basis. We have to wait and see whether the trend is sustainable since we are entering the monsoon phase. While other factors are improving, we have to see how the monsoon will pan out and the consequent impact,” said the CEO of a leading cement company.

A couple of weeks ago, India Cements Vice-Chairman & Managing Director, N Srinivasan, indicated that June sales were turning better and volume offtake was much better than what they expected.

Pent-up demand from rural and semi-urban centres has been driving sales of cement, while big cities are reporting slow recovery with the restart of only some select projects amid easing of Covid restrictions.

Analysts pointed out that the rural segment was the first one to show pick-up, followed by Tier-III/Tier-II, which also started contributing to volume growth. Boost in rural income on better crop and pricing, and increased spend by the government on MGNREGA, among others are also contributing to the demand growth in rural areas.

While the West and South regions are reported have seen moderate improvements due to higher Covid-19 cases and restrictions, North, Central and Eastern regions have registered meaningful improvements.

States like Rajasthan witnessed stronger offtake during June and volumes are reported to have grown in double digits. Similarly, growth in Central and Eastern markets was also healthy due to pent-up demand.

Activity in urban areas is expected to remain weak in the near term due to the onset of monsoon and lower availability of labourers, While cement prices have been rising on a year-on-year basis, energy costs have been trending down in the past six months, which should help reduce the adverse impact of negative operating leverage, according to analysts at Motilal Oswal Securities.

Cement prices have increased in the range of 3-10 per cent year-on-year basis depending on the region, except for the East. But on a month-on-month basis, some regions witnessed a fall of up to ₹10 per bag mainly due to higher discounts with the onset of monsoon.

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Published on July 08, 2020
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