Sector Update - Cements

Cement prices declined in all regions, except the South, for Jul-2020, with the monsoon intensifying. The region-wise price decline was in the range of Rs.2-18 per 50kg bag (1-6%). However, demand has improved in the northern and western regions, it has turned sluggish in the eastern region on account of the monsoon and the resumption of lockdown, as per the reports. All-India average price for end-July is up 3% YoY and down 2% MoM.  We expect the sequential price decline to continue into August, due to the monsoon and expect prices to improve from September.

North – Price decline moderates:

After a sharp decline in June, the price decline has moderated for July, in the northern markets. Demand has slightly improved for the month of July compared with June, except in the New-Delhi market, due to shortage of labourers, as per the reports. Demand continues to be strong in the rural areas of Punjab and Rajasthan. Demand is expected to be moderate in August, with the monsoon likely to mitigate, and prices are likely to go down further. End-July price range was Rs.260-345 per 50-kg bag in New Delhi, Rs.240- 340 in Jaipur, and Rs.300-360 in Ludhiana.

South – Marginal price hikes in a few markets:

Cement prices per 50kg bag improved by Rs.10 in Chennai and by Rs.25 in the non-trade market in Hyderabad in July, and prices largely upheld for the entire month; Hyderabad price hikes were primarily taken by smaller brand players. Prices in Bengaluru and Kochi were largely stable for the entire month. Demand was sluggish in July, as per the reports across the region, due to lockdowns in major markets. No new price hikes were announced in the current month.  The end-July price range was Rs.310-365 per 50-kg bag in Hyderabad, Rs285-395 in Bengaluru, Rs.330-415 in Ernakulam, and Rs.330-425 in Chennai.

East – Prices continue to slide due to monsoon:

With the monsoon intensifying, both cement demand and prices have weakened in the eastern region. The price decline is to the tune of Rs.10-30 per 50kg bag, which is the highest for the month of July across regions. Resumption of lockdowns in Patna and lack of pre-election spending has depressed the sentiment; The reports indicated that the demand has weakened in rural areas too. Demand is expected to be sluggish for the next few months, and any improvement is likely only post the Dusshera festival. End-July price range was Rs.245-310 per 50-kg bag in Kolkata, Rs.280- 340 in Patna and Rs.250-305 in Bhubaneswar.

West – Largely stable prices in both, Maharashtra and Gujarat:

Led by strength in prices in the South, Maharashtra prices for July were largely stable. Demand is gradually improving in Maharashtra, as work has commenced at many sites, as per the reports. The lockdown enforced in various cities in the last one month has not dented demand much. However, it is uncertain that the current demand strength will continue, as there is a financial crunch in the market. Prices in Gujarat are also largely stable for July. The end-July price range was Rs.290-350 per 50-kg bag in Mumbai, Rs.320- 370 in Pune, and Rs285-345 in Ahmedabad.

Central – Huge inflows from the southern region ease prices:

Cement prices eased by Rs.5-20 per 50kg bag in the central region, due to huge inflow from the southern region, in July. As per the reports, even a good brand from Andhra Pradesh reaching as far as Indore is selling at the lowest price. In Bhopal, demand was weak due to a complete lockdown for 10 days, till 4-August. Similarly, demand in Lucknow is also weak due to the financial crunch. However, demand in rural areas is strong. The prices are likely to erode in August, with likely improvement in the monsoon and a further improvement thereafter. The end-July price range was Rs.290-375 per 50-kg bag in Lucknow, Rs.250-340 in Bhopal, and Rs.255-320 in Indore.

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