Cement companies have initiated a price hike of around ₹15-30 per bag primarily across South, East and West Indian markets; even as demand continues to be “sluggish”. The price hikes, which were in offing, came on the back of 2 – 3 per cent hike initiated in October, on a month-on-month basis.

Cement prices increased ₹5-20 /bag month-on-month (m-o-m) in South, East and West India, while remained flat in North and Central India in October.

The highest increase was seen in South India ( up 5 per cent m-o-m in October), followed by West (3 per cent m-o-m) and East (2 per cent m-o-m). Cement price in South India improved in the range of ₹10-35/bag with the highest increase in Kerala, followed by Karnataka, Tamil Nadu and Andhra Pradesh, a report by Motilal Oswal said.

“In the first week of November, cement players announced price hikes of ₹5- 10/bag across regions. As per our channel checks, cement players are planning to implement another price hike of ₹10/bag across regions,” the report mentioned.

According to cement company official, the price hikes came looked at improving margins, particularly after a poor outing in Q2 (quarter ending September 30).

Numbers take a hit

High costs and low realisations were two major issues that plagued major cement companies.

The EBITDA margin for the sector contracted by 1155 basis points (bps) y-o-y and 694 bps q-o-q, analyst firm Nirmal Bang said in its report.

On the other hand, aggregate volume came in at 70.7 million tonne , up 8.6 per cent y-o-y; but down 7 per cent q-o-q. Realisations declined by 2.4 per cent q-o-q . Revenue for the sector declined 9.3 per cent q-o-q .

In October, domestic pet-coke prices increased 5 per cent month-to-date to nearly ₹18,500 per tonne. The US and Saudi Arabia pet-coke prices were up 3 – 5 per cent (on a per tonne basis). On the other hand, the imported coal price saw some decline of approximately 20 per cent over the last one month.

H2 outlook

Average spreads (cement price net of GST- variable costs) should improve by ₹300 / tonne for the industry in Q3FY23 over Q2FY23, Motilal Oswal’s report said adding that profitability in Q2FY23 seemed to have “bottomed out”.

“However, October demand was sluggish as it was festival season and the first half of November is slow as it is harvesting season. So we will have to see if the price hikes are sustainable or not,” a cement industry official said.

The official said, cement demand was subdued in October 22 due to early festive season and is estimated to decline ~7-8 per cent y-o-yand ~3-4 per cent m-o-m .

Typically end-November, December and January – March period are seen as the seasonally strong period for the sector; and consumption growth is expected this time on the back of improved labour availability and rural demand, government’s thrust on infrastructure (aided by pre-election govt spending) and steady demand from the housing segment. Fund release at the local body level across some of the stable consumption markets of North, Central and West India too would aid growth in numbers.