Cement prices up in January; east, south lead hikes

Cement prices have seen a 3 -5 per cent month-on-month price increase pan-India in January, led by hikes coming in primarily across east and southern regions.

The upward movement came after weak demand witnessed in November – a wash-out for cement companies – continued into a part of December. Extended rains in South India, and sand mining issues in the East (Bihar and Bengal) were also reasons for weaker demand for nearly half of the Oct-Dec period.

Cement companies indicate that there has been a marked improvement in demand Mid-December onwards, and this will not just support the upward price trends. Still, it could also lead to a possible price hike in February.

Market sources say hikes in South and East were around 5 per cent and 6 per cent respectively. In the West and North, prices went up 3 per cent and 1 per cent respectively; while in Central India they remained flat m-o-m.

Mahendra Singhi, MD and CEO, Dalmia Cement (Bharat) Ltd – the fourth-largest player in the country – told BusinessLine that capacity utilisation was 69 per cent in Q3 FY22, and at 83 per cent in December; it is expected to be in the 70-75 per cent range for Jan – Mar quarter. He indicated price hikes in select regions were being rolled out already.

In a post earnings call, Shree Cement’s (second-largest cement-maker) managementsaid that price increases were happening across its operating geographies in January – February 2022.

“(Price) increase is positive and is coming after two months of soft prices,” IDBI Capital said in a recent report.

Upward price movement

In its outlook for Q4FY22, Birla Corp said cement prices have been raised effective the third week of January, and prices, going forward, are expected to remain firm. Demand recovery looks favourable, except in poll-bound Uttar Pradesh, where “elections could hobble construction activities”.

Star Cement, a predominant East and North East India region player, in its earnings call said, prices in East - which were “really muted in the month of November and December” – were moving up in January (around 3 – 4 per cent). “The prices have started going up only from January 10. So, you can fairly assume that 50 per cent of that price drop (in the East) has already been recovered in the month of January. And the balance is a yet to be recovered,” the management said.

Ramco Cements’ management reportedly said, from mid-January 2022, prices have risen by Rs 30 – 40 / bag in West Bengal and ₹ 15–20/bag in Odisha and expect prices in East to further go up. Also, prices have increased by ₹ 15-20/bag in the south, with ₹30-40/bag in Kerala.

Cost pressures

Meanwhile, cost pressures continued for cement companies in January 2022. The average imported coal price was up 9 per cent m-o-m in January at around $ 161 /tonne. Freight index was flat m-0-m in Jan. Input cost primarily led by crude – around $92 -92 per barrel - has also been volatile over the last few days.

Analysts have already flagged short term concerns on cement companies because of volatility in crude prices. They have referred to near-term concerns on the stickiness of cost inflation if oil prices do not fall.

In the case of UltraTech (India’s largest cement-maker) stock, analysts like JP Morgan, Jefferies and Prabhudas Lilladher gave a neutral, hold or accumulate option, respectively. At the same time, those like Goldman Sachs and Credit Suisse went with buy or outperform one (based on its Q3 numbers).

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