Across India, cement companies have increased prices by ₹10-15 per 50 kg bag, after being under pressure the last few months due to weak demand. High prices have been announced by major cement companies ranging from ₹10-15 per bag in the North to ₹30-40 a bag in the Central and East. Likewise, in the western region, prices have increased by ₹20 a bag, says a cement dealer. The price hike comes after five consecutive months of drop in cement prices due to weak demand. Despite the weak demand in the last few months, dealers expect the long-term growth story of India to remain intact supported by a thrust on infrastructure, revival in the real estate sector, and unveiling of industrial capex.
Ashutosh Murarka, Cement Analyst, at Choice Equity Broking, said cement companies are preparing to implement price hikes of ₹5-10 as discounts and promotional schemes expired last month. Additionally, a substantial price increase of about ₹15-20 is expected before the monsoon season to capitalize on the 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 percent on a sequential basis after the industry prices were reduced for five consecutive months.
Dharmesh Shah, Research Analyst, Emkay Global Financial Services, said that last September there was a sharp rise in cement prices but had to be reversed in the last five months. The capacity utilization level of the industry has moderated in the last few years due to fresh capacity addition over 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 utilization levels pan-India, except in pre-election FY19, says CareEdge Ratings.
Ravleen Sethi, Associate Director, CareEdge Ratings, said the industry is on its path to adding significant capacities, which may lead to excess supply, mostly in the medium term with demand dropping because of the ongoing general elections when the construction activity usually slows down. This along with intense competition among players to maintain their market shares has been putting pressure on the realizations from the second half of FY24.
