Elections dampen cement prices in April, hikes announced earlier rolled-back

Cement price hikes, announced earlier this month, have reportedly been put on-hold following slower-than-expected demand through most of April, and resistance by dealers, specially in the eastern and southern regions.

April exit prices are expected to remain either flat or slightly lower than March levels, say sources. Cement companies had announced price hikes April onwards – to the tune of ₹10 per bag (average pan-India price).

The gone by January-March period was the fifth straight quarter when cement-makers failed to initiate or give effect to any major price increase.

Pricing Pressure

Cement prices continued to be under pressure in Q4, declining 7.5 per cent quarter-on-quarter. But, the Q4 exit prices are 9-10 per cent lower than Q3 average prices. “For the month of April, cement prices are 2 per cent lower than Q4 exit prices. With elections in Q1 and the monsoon in Q2, cement price-hikes are likely only in H2 FY24,” Anand Rathi said in a report.

The price weaknesses are expected to play out till September 2024, at least. According to a market participant, the demand in H1FY25 (April-September) is estimated to be moderate due to the General Elections (till June), followed by the monsoon season (July-September).

Puneet Dalmia, MD and CEO, Dalmia Bharat, amongst the top five cement-makers in India, during the recently held earnings call said prices were to remain soft in H1FY25, amid the impending general elections followed by monsoons.

Analyst firm, Motilal Oswal, in a recent report, said, it was not expecting cement prices to drop further. “And improvements would happen H2FY25 onwards,” it added.

Capacity addition

All-India cemnt demand has been guided to grow 8.5-9 per cent in FY25. The elections may slow this down temporarily, but long-term demand would be intact, likely to grow 1.25x GDP growth. Consolidation is likely to maintain a high entry barrier in the industry.

Accordingly, price hikes – as and when they come in - will continue to remain moderated.

Pricing environment may continue to be volatile given the odds of slow volume off-take in post-election year (at 6-7 per cent vs 9-10 per cent in FY24); and massive fresh capacity addition of 61 million tonnes per annum (mtpa) – which include 34mtpa clinker - in FY25 – and another 62 mtpa cement capacity (which include 38mtpa clinker) in FY26.

Ramp-up of the acquired and under-utilised units – Sanghi Industries in west India (7 per cent of region’s capacity) and JP Associates’ assets in central India (7 per cent of region’s capacity) – would make price hikes more challenging.

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