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Cement companies have increased prices across India by ₹10-15 per 50 kg bag, after being under pressure last few months due to weak demand.
Major cement companies have announced price hike ranging from ₹10-15 per bag in the North to ₹30-40 a bag in the Central and East. Similarly, in the western region, prices have gone up by ₹20 a bag, said a cement dealer. The price hike comes after five consecutive months of drop in cement prices on back of weak demand.
Despite the weak demand in last few months, dealers expect the long-term growth story of India to remain intact supported by thrust on infrastructure, revival in the real estate sector and unveiling of industrial capex.
Ashutosh Murarka, Cement Analyst, Choice Equity Broking, said cement companies are preparing to implement price hikes of ₹5-10 as discounts and promotional schemes expired last month.
Moreover, a substantial price increase of about ₹15-20 is anticipated before the monsoon season to capitalise on expected heightened demand for construction materials, reflecting the dynamic market conditions for cement companies.
Cement prices in the March quarter were down by about 5-6 per cent on a sequential basis after the industry prices declined for five consecutive months.
Dharmesh Shah, Research Analyst, Emkay Global Financial Services, said the sharp rise in cement prices was introduced last September but had to be reversed in last five months and a price hike of ₹10-50 a bag is expected in April aimed at arresting the persistent decline in prices.
Higher sales seen
Sales volume in the March quarter is expected to increase in a high single-digit year-on-year against 5 per cent logged in December quarter. Demand may soften in June quarter due to the upcoming general elections, he added.
The capacity utilisation level of the industry has moderated in last few years to fresh capacity addition in excess of demand. Between FY15 and FY20, the industry added about 103 mtpa of capacity, but demand grew only by 66 mtpa in the same period leading to lower utilisation levels pan-India, except in pre-election FY19, said CareEdge Ratings.
The cement industry will add further capacity of 90 mtpa till mid-FY26 and this may go up to an addition of 140-150 mtpa by FY28-FY30.
Ravleen Sethi, Associate Director, CareEdge Ratings, said the industry is on its path to add significant capacities, which may lead to oversupply, particularly in the medium term with demand slowing due to ongoing general elections when the construction activity generally slows down.
This along with intense competition among players to maintain their market shares has been putting pressure on the realisations from second half of FY24, he said.
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