Cement demand improves, volumes begin to bounce back

V Rishi Kumar Hyderabad | Updated on February 21, 2021

File photo   -  Businessline

There has been a rebound in the Western region's demand led by a recovery in the urban real estate sector.

Overall cement demand in the fourth quarter of the current fiscal has improved, and the volumes have bounced back, according to Motilal Oswal sector outlook on cement.

Its report states that while in the North and West regions, there have been price hikes, the South and East were on the decline. It's channel checks indicate that the seasonal uptick in demand is playing out, with volumes bouncing back strongly from the weakness seen in early January.

With about 10 per cent YoY growth in volumes in 3QFY21, the research firm expects volumes to grow 18–20 per cent YoY in 4QFY21 supported by the low base of 4QFY20 had declined 13 per cent YoY due to the Government-mandated lockdown in March.

In February (over 8-10 per cent YoY), the demand has been strong, led by continued strong demand in East, North, and Central and revival in West. However, the demand remains weak in the South.

The East's demand has been robust, supported by pre-election spending in West Bengal and strong industrial and infra demand in Odisha. And in the North and Central region, it has also improved in February, supported by a receding winter season, which has improved the pace of construction work.

The West's demand has rebounded strongly, led by a recovery in urban real estate and construction. Maharashtra volumes are now on the rise for the first time since the pandemic.

The demand has remained weak in the South on a YoY basis but improved sequentially, driven by a substantial uptick in Andhra Pradesh and Telangana. The Cement industry in the South has exhibited a strong production discipline in the past year, in the face of weak volumes.

The prices in the South are still up by Rs 30/bag (or 9 per cent) YoY to Rs 371/bag in February 2021, led by hikes taken over in Apr–May'20. Prices are up 11 per cent/12 per cent/12 per cent/3 per cent YoY in Andhra Pradesh / Tamil Nadu / Karnataka / Kerala.

In North, the prices are up by 2 per cent MoM (flat YoY) to Rs 378/bag, led by a Rs 5–10/bag hike across the region, supported by high plant utilization (90 per cent). However, the prices in the Central region have been flat MoM at Rs 349/bag (up 3 per cent YoY).

The West's demand has rebounded strongly, led by a recovery in urban real estate and construction. Maharashtra volumes are now growing for the first time since the pandemic. Demand in Gujarat has also been strong at 5–10 per cent YoY.

Price in East has declined Rs 50/bag or 15 per cent since May 2020. In February, while West Bengal witnessed a price increase of Rs 5/bag, the price has been flat in other states. The East's average price is down 11 per cent YoY to Rs 273/bag (flat MoM).

Published on February 21, 2021

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