Cement Firms May Have To Roll Back September Price Hike: Report

The Indian cement companies may have to roll back the September price hike due to continued weak demand, as per a report by Nuvama Institutional Equities. "We believe price hikes may have to be rolled back by month-end due to weak demand. Even so, demand is likely to pick up from the third quarter of the current financial year, which should support prices somewhat," the report said.

With weak demand expected to persist through the first half of the current year (H1FY25), substantial price hikes are unlikely to materialise. The report highlights that across different regions, the price weakness varies and the overall trend remained downwards, with dealers expecting a recovery in prices only in the later part of the second half of FY25.

While demand is expected to pick up in the third quarter of FY25, the current scenario has raised concerns about the sector's ability to maintain pricing power in the short term. Cement demand is projected to improve from Q3FY25 onwards, driven by the post-monsoon recovery in construction activities. This, in turn, is expected to support prices and provide some relief to the sector.

The continued drop in cement prices in August 2024 was a result of subdued demand, exacerbated by the monsoon season, unavailability of labour, and a slowdown in construction activities. In the East, prices fell by Rs 5 to 7 per bag in August. The region has been significantly affected by sluggish demand due to labour shortages, heavy rains, and a slowdown in construction.

The outlook remains bleak, with demand expected to pick up only after Durga Puja in H2FY25. Although a price hike of Rs 20 per bag was notified in early September, dealers expect it to be rolled back due to the persistently weak demand. The Southern region saw the sharpest decline in prices, with a drop of Rs 10 per bag in August, reaching multi-year lows. Rains contributed to the demand slump, and dealers anticipate an improvement in Q3FY25.

While prices appear to have bottomed out, the region has seen some price hikes: Rs 20 per bag in the non-trade segment and Rs 30 per bag in Karnataka. However, the absorption of the Rs 20 price hike in the trade segment remains uncertain. Demand in the North was negatively impacted by the monsoon and a slowdown in construction activities due to liquidity constraints.

Prices dropped by Rs 3 to 5 per bag in August. A modest price hike of Rs 15 per bag was implemented in early September, but dealers expect this to be reversed as demand remains weak. The Central region experienced subdued demand in August due to local festivals, issues with sand mines, and the monsoon. Prices remained flat month-on-month, but a price hike of Rs 25 to 30 per bag was notified in Chhattisgarh. However, dealers anticipate a recovery in demand is expected by mid-October.

In the West, prices were flat in August, with demand remaining subdued. Both demand and prices are expected to improve only after the second quarter of FY25. Industry experts maintain a cautious stance on the sector, reiterating that cement companies may struggle to implement meaningful price increases in the near term.

While cost efficiency measures and softening power and fuel costs could help mitigate the negative impact of weak realisations, the overall sentiment in the cement sector remains cautious. (ANI)