Cement prices have declined in December amid a rise in volumes even as demand remained steady.
As per an analysis of the cement market by Emkay Global Financial Services, average pan-India cement prices declined sharply by 5% month-on-month in December 2021, largely driven by the volume push.
Prices declined 6-7% MoM in the east and south, while prices in other regions fell by 3-4%. The report said industry volumes likely increased by 25% MoM.
All regions are likely to have witnessed 20-30% MoM volume growth. There should be a YoY demand improvement in December across regions, except east, the brokerage said.
With demand recovering, companies have announced price hikes of ₹10-30/bag across regions for January 2022. However, absorption of the same will be known in the next few days.
Receding festival holidays, unseasonal rain, improving sand availability and easing inflation in construction costs, along with a pick-up in infra projects led to the improvement in volume growth month-on-month.
“We expect demand to pick up further (from mid-Jan’22) after Kharmas, with an increase in government spending and an uptick in rural demand,” Emkay said.
Margins are expected to bottom out in Q3FY22, with likely demand/price recovery. Cost inflation should ease off from Q4, with a 15-40% decline in input prices (petcoke, coal, and diesel) from their recent peak, the brokerage said adding that the developments project positive run further the sector.
After an over 40% increase in the past two years, industry EBITDA/tonne is expected to remain flat in FY22E but likely to see a 4-5% CAGR over FY22-24E, the report said.