Cement Prices Fall For Fifth Straight Month

31-Dec-2018

All-India cement prices fell for the fifth straight month in December because of excess supply from the south and year-end volume push by pan-India players like ACC Ltd. and Ambuja Cement Ltd.

Prices fell for the fifth month in a row in the south, according to BloombergQuint’s interaction with dealers and separate surveys by at least two brokerages. Demand remained muted in northern, central India and western India. On an average, cement was cheaper by Re 1 per bag across regions, continuing the downtrend that started in August.

Morgan Stanley, which has downgraded the sector, isn’t optimistic. It said in a recent note that upside for cement prices is capped in the second half of FY19 mainly due to demand risk in the real estate segment because of potential funding challenges.

Pan-India cement makers like ACC and Ambuja Cement haven’t increased prices to boost their year-end volumes, said Sanjay Ladiwala, executive committee member of Cement Stockists & Dealers Association of Bombay. A dismal demand in the south led companies to push their products to other regions, adding to a pricing pressure in those areas, he said.

Lack of demand in southern India, according to an Ultratech Cement dealer in Madurai, is due to a host of issues like an unstable government in Tamil Nadu, slower approvals for real estate projects and lack of timely payments to contractors by the government.

On an average, cement prices declined by Rs 5 per bag this month in the region, continuing the decline that started in August.

The prices in southern India were also weighed down by oversupply stemming from rich deposits of limestone, a key raw material in cement making. PR Venketrama Raja, chairman and managing director of south-based Ramco Cement Ltd., doesn’t expect pricing power to return anytime soon.

It would take a few more years of demand growing at around 23 percent to achieve the pricing power, he said. That’s despite the recent growth impetus by Andhra Pradesh and Telengana, where infrastructure activity has picked up pace, he said.

North-based cement dealers, however, expect a hike in prices to the tune of Rs 5-10 per bag from January onward as business activity picks up at the start of new year when workers return. Most of the construction labourers move back to villages in the month of December for harvesting of seasonal crops, said Kuldeep Aggarwal from Aggarwal Cement store at Karnal, Haryana.

Source: BLOOMBERG QUINT