Economy

Rise in demand to push up cement volumes, higher prices to negate increase in costs

Our Bureau Hyderabad | Updated on April 17, 2021

Demand in the sector is poised for a 9 per cent CAGR over FY21-23

For Q4 of FY 2021, cement companies are likely to report good volumes on greater demand, backed by strong rural, housing and infra demand and a favourable base of the 8-10 days lost in March 2020.

Despite rising costs, profitability will rise boosted by higher prices and cost optimisation, according to Anand Rathi India Cement Review.

On higher rural (irrigation) demand, and demand to complete last-stage projects, and government steps to generate employment, overall demand is improving. Costs are once again returning to pre-Covid levels with rising prices of crudeoil and diesel.

Higher government allocation to infrastructure, to generate employment, and to low-cost housing projects would give a fillip to demand growth, both urban and rural. Demand in the sector is poised for a 9 per cent CAGR over FY21-23.

Channel checks suggest March 2021 volumes could be very strong on firm demand across regions due to greater rural demand and a rise in infrastructure activity along with volumes lost on the lockdown from March 2020.

Rising input costs and swelling demand led to cement prices rising across regions. Prices rose 2.5 per cent y/y (2.7 per cent q/q) where on the low year-ago base, prices rose the most in the South; in the East, price rises q/q averaged ₹15-20/bag after touching the lowest in Q3. In the West and North, prices continue to be firm with a ₹5-10/bag hike q/q whereas prices in the Central region were flat.

On the exhaustion of low-cost stocks, higher costs are likely due to higher petcoke/coal/diesel prices though partially offset by alternative fuels and changes in the fuel mix. To protect profitability, cement companies passed on higher costs through price hikes.

The all-India cement prices were up 2.5 per cent y/y, 2.7 per cent q/q and cement prices averaged ₹343 a bag (up 2.5 per cent y/y, 2.7 per cent q/q) in Q4 FY21.

Published on April 17, 2021

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