Cement prices see sharp correction in November in East, South India

“As per our channel investigation, industry volume in the high-teens month-on-month (high single-digit year-on-year) in November ’21 due to festivals, construction restrictions in the North, sand mining issues in the East region, heavy rains over parts of south India, limited labor availability and a high base,” analysts at Emkay Global Financial Services Ltd said in a report on December 2.

As a result, investors’ fears that lower demand will impact prices, which were recently raised, have come true.

The latest dealers channel checks by various brokerages show that cement prices at an all-India level have declined by an average of around 3% in November as compared to the previous month. Among regions, East and South India witnessed more price corrections as compared to other markets.

“Within regions, the South saw the most decline (-4.8% month-on-month), followed by East (-3.2% month-on-month); while for the North, West and Central regions, prices remained flat. Analysts at IIFL Securities Ltd said in a report on December 3, “Largely unchanged during the month. Key points to highlight: The fall in prices in the past has completely reversed the hike made in October 2021 and prices are now back at end-September levels.

The IIFL report further pointed out that the November-exit prices are sharply 5% lower than the October-exit prices. A cement sack, which weighs 50 kg, now costs around Rs 336.

Fall in prices in the backdrop of cost pressure does not bode well for operating margins of cement companies. Analysts said that even though petroleum coke and coal prices have seen some moderation from their peak, its gains will be visible in the December quarter also with a lag, keeping margin growth sluggish.

Meanwhile, dealers expect a meaningful improvement in volumes in Q4 of the financial year with increase in construction related activities.