Real Estate

Spike in cement prices troubles construction, real-estate sectors

V Rishi Kumar Hyderabad | Updated on May 13, 2020

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Cost of cement has shot up by ₹120-130 per bag during Covid-19 lockdown

The construction and real-estate sectors, two of the largest consumers of cement, are a worried lot as the prices of the key raw material have shot up by 30-50 per cent during the Covid-19 pandemic.

This has triggered a series of meetings with various stakeholders, Telangana government representatives and cement companies to re-consider the decision on price hike.

After the prolonged lockdown due to the coronavirus, even as the construction sector has initiated baby steps to revive activity, the cement price hike has become a matter of serious concern.

G Ram Reddy, Chairman of Credai Telangana, said: “The prices of cement have shot up by ₹120-130 per bag. As against pre-Covid-19 prices of ₹220-250 per bag, the prices are now ruling at ₹340-370. This spurt is tough for the construction sector to take in its stride, especially when it is already reeling due to the national lockdown.

“A meeting was convened recently, where Telangana Industries and Commerce Principal Secretary Industries Jayesh Ranjan and various stakeholders, including representatives of the cement industry, interacted over the web on the price rise. The cement manufacturers assured that they will come back and share why the prices had to be increased, and what is possible from their side. We will know the outcome soon.”

C Shekar Reddy of CII-IGBC (Indian Green Building Council, part of the Confederation of Indian Industry) and former National president, Credai, said: “The construction sector highlighted the importance of the critical input of cement and the prices in these testing times, where the entire system has come to a grinding halt. The representatives wanted the cement manufacturers to consider offering the material at pre-Covid-19 prices as they are not in a position to afford such a huge price hike.

“A huge escalation in these times is something very tough to adjust to. We are hopeful that cement firms will respond to our requests.”

Since the construction sector is largely dependent on the migrant workforce, the timely revival of the sector is critical as any delays may lead to many of them seeking to return to their home towns.

Dented prospects

A recent report on the cement sector by Motilal Oswal has said that the Covid-19 pandemic has dented the prospects of the Indian cement sector. Besides materially dragging the sector’s improving utilisation curve, the virus outbreak has also pushed ahead emerging pricing power of companies in North/Central India by at least two years.

Given the sub-optimal expected utilisation across regions, sustenance of production discipline would be the key to prices and margins. The report expects the first leg of volume recovery to be driven by infrastructure, followed by rural and low-cost housing and from urban housing.

Dispatches in April last week were happening at pre-lockdown price levels, with some raising prices by about ₹20 per bag. However, the situation has changed in the past week since the government permitted construction activity.

Published on May 13, 2020

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