Weak demand conditions prevailing in the country has not deterred the cement manufacturers who have hiked the price last week. Cement prices have gone up by Rs.20 per bag in East, South and West region and Rs.10 per bag in North and Central region. Notably, price hikes have been implemented in the non-trade segment as well. Currently, all-India average cement price is up 4% year on year basis. However, prices in South are down by 1% due to sharp increase effected in February last year.
According to some dealers, another price hike may be expected in the second half of the month. In the second half of the month, construction activities usually pick up post festive season and the second price hike may coincide with that period. However, the dealers suspect the sustainability of these price hikes considering year end target pressure when the focus will be mainly on increasing volume.
While demand continues to remain weak in most of the regions owing to slower pace of pay out from state governments leading to stretched working capital and liquidity constraints for dealers impacting non-trade demand, trade demand improved from low levels seen in first nine months of the current financial year. Some analysts believe that liquidity tightness and funding paucity for infrastructure projects in combination with the weak organised retail housing demand will make it difficult for the cement suppliers to maintain the prices at the elevated level.
According to some dealers, rising tensions in Middle East, has pushed up crude oil prices in last few days and if the tensions fails to subside in the next few days, cement manufacturers would be faced with increased power and logistics cost. In that eventuality they would be left with no option but to hike prices of their products.