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With the monsoons receding and construction activities being put back on track, cement firms might opt for price hikes by mid-September in eastern India and early October across certain other regions.
In August, average pan-India prices corrected by about 2% on a month-on-month basis, while a fall in prices of pet coke — which is now cheaper than imported coal — would help in improving their profitability.
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“Generally for the industry, the demand has picked up substantially well after the monsoons in September, and with July and August the dispatches are also on the rise. Pet coke prices had fallen in August; however, they have started to firm up again this month as global crises such as the Ukraine war continue,” Prashant Bangur, joint managing director at Shree Cement, said.
“The September quarter would be a slow quarter for the industry, because of the cost pressures that are still lingering. The country had recorded phenomenal rains — except for eastern India — in this quarter, and this time the seasonally strong December quarter is expected to be good,” Bangur said.
Cement companies hiked prices by Rs15-20 per bag (up 4-4.5% month-on-month) in eastern and western India (in the non-trade segment), effective September 6, with the possibility of a further hike of Rs 15 per bag across the east by mid-September. They are likely to hike prices across the north and central regions from October’s first week, brokerage firm ICICI Securities said in a report.
“Pan-India average prices corrected by about 2% MoM in August, the steepest fall being in north and east India by 3% and 4%, respectively, followed by 1.5% dip in south India,” it said.
The average industry Ebitda per tonne could still decline in the second quarter, turn broadly flat in the third quarter and start to inch up from the fourth quarter, both on quarter-on-quarter and year-on-year basis. This is assuming the spread between cement and fuel prices sustains or improves from current levels, it said.
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According to a report by Jefferies, cement producers in the east have announced a Rs 10-15 per bag hike from September 5 and have indicated another Rs 10 rise from September 15. In the west, prices rose up to Rs 20 in Ahmedabad and Pune from September 5, while there were no hikes in Mumbai.
“Dealers are sceptical of the price hike getting absorbed as the monsoon has yet to recede in Gujarat, and increased competition in the Pune market with Shree Cement increasing despatches from its recently commissioned plant. For August, cement prices declined by `5-6 per bag in the region as the monsoon depressed demand,” it said.
In the central region, where prices were largely stable, producers are yet to announce any hikes, but withdrawal of certain discounts pushed up prices by Rs 5-10 per bag. While prices declined in the north and south in August, mainly due to the monsoons, there were no price hikes announced so far, Jefferies said.
According to Motilal Oswal Financial Services, cement prices have remained under pressure and fell by 1-3% MoM across regions, excluding in the south, in August. In the second quarter, prices fell by about 5% across India.
“A few of the dealers in north and central India, and Gujarat indicated likely price hikes in the range of Rs 10-20 per bag in September,” it said, adding that the recent fall in pet coke prices would help in reducing operating costs by `280 per tonne in third quarter, following a Rs 200-250 per tonne rise in the second quarter.
Pet coke prices have declined over the last three months and are trailing 36-48% cheaper than imported coal, it added.
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