Weak demand keeps cement prices in check

Our Bureau Mumbai | Updated on October 01, 2019 Published on October 01, 2019

Cement prices declined by about 3 per cent last month across regions due to weak infrastructure activity

Trade prices in the North declined by Rs 10 a bag

Cement companies are struggling to implement the price hike of ₹10-20 per 50 kg bag announced last week in the retail segment of the north and western regions due to weak demand and late withdrawal of the monsoon.

In fact, a dealer said the price hike of ₹50 a bag implemented in Andhra Pradesh and Telangana is being negated by offering discounts to boost sales.

There is a reduction of ₹20 a bag in the billing price and another ₹30 is being offered as a special discount, he said.

Cement prices declined by about 3 per cent last month across regions due to weak infrastructure activity. While prices in Maharashtra fell by ₹20 a bag, they have been much higher in other regions due to fresh capacity additions.

Trade prices in the North declined by ₹10 a bag. The price difference between trade and non-trade prices increased to ₹50 a bag in a few markets against the normal difference of ₹20-25 a bag.

Companies are trying to boost sales by offering dealers special incentives and lower prices for bulk purchases. This may lead to white goods-like offers for customers from dealers during the festival season.

While prices are under pressure, the fall in raw material prices should bode well for cement companies and protect their margin till demand recovers with government infrastructure spending in coming months.

Government ability to spend clipped

The Central government’s ability to spend on infrastructure will be restricted on lower tax collection and due to the cut in corporate tax.

As of September, State borrowing has increased by 34 per cent, which could limit their spending in the remaining months of the fiscal.

Similarly private sector investment in capacity expansion will also be limited as most of the companies in the manufacturing sector are operating at 70-80 per cent of the capacity.

Published on October 01, 2019
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