Home News Cement sustains price hike

Cement sustains price hike

After near washout in April, semblance of normalcy seems to have returned to cement market in May. Though the cement companies were allowed to operate from April 20th, normal operations (with restrictions and social distancing measures) started only from May. As was expected demand mainly came from rural areas and small towns with urban areas still struggling to deal with issue of migrant labour.

Demand recovery in rural and semi urban zones was 60-70% while in urban areas it was just 30-40%. However, based on initial trend it is difficult to extrapolate for the entire season due to pent up demand which may fade away soon.

According to dealers most of the demand was from trade segment and the institutional demand was comparatively weak. However, going forward, institutional demand may pick up due to various moves of the government but dealers are mostly sure that rural demand will lead the way. In the coming days, rural demand is likely to grow further due to various measures taken by the government like increased fund release for MNREGA.

Reopening of factories coincided with price hike – average Rs 30-35/bag price hikes through reduction in discounts and hike in billing rates was effected (in April Rs 15/bag & May Rs 20/bag) which on pan India basis was surprisingly sustained. Unconfirmed sources say that price was once again hiked to the extent of 3-6% in June in Western and Northern region.

Hike was highest in the Southern region which saw prices going up by Rs 70-80/bag. Southern region also faced severe shortage of flyash and if the problem continues it may lead to further price hike. In Western region price hike was milder as the major markets of Mumbai and Ahmedabad were still reeling under COVID impact.  Central and Eastern regions have seen milder price increase and AMPHAN cyclone has affected the availability of sand in Odisha and West Bengal which may impact the construction activities in the near future. With most of the factories operating at 70-80% there is little scope for further price hike. In the North, prices were increased by Rs 20-25/bag across key states with further Rs10/bag of increase from 1st June.

Much to the delight of cement manufacturers, domestic petcoke prices have corrected by 17% MoM/ 24% YoY to Rs 5,892/tonne which is the lowest since August 2016. Price reduction was effected from 1st May itself. Further, international coal and petcoke prices have witnessed 15-20% corrections MoM basis thus helping the cement manufacturers to keep the fuel cost under check.

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