Cement companies expect demand to pick up from Dec as rains recede

Heavy rains in Tamil Nadu, Kerala, Andhra Pradesh and parts of Maharashtra dragged volumes across sectors during festivals.

As rains recede in southern and western India, cement companies expect demand and consumption to pick up from December.

“Slowly demand is coming back to normalcy across all sectors. In a week or so we may even see pent-up demand coming back,” M. Ravinder Reddy, director at Bharathi Cement, told Business Standard.

Heavy rains in Tamil Nadu, Kerala, Andhra Pradesh and parts of Maharashtra dragged cement volumes across sectors during festivals coinciding with peak season for the industry starting October until May.

As demand fell, prices of the commodity have also declined as players offered discounts to push up volumes, said industry officials.

"Average pan-India prices declined 3 percent month-on-month in November owing to weak demand. The moderation in prices was primarily led by a 4-5 percent month-on-month decline in the east part of India, while prices in other regions fell 2-3 percent month-on-month," said a recent report by Emkay Research.

Input cost pressures are likely to continue as demand picks up, creating price hike pressures, said industry officials.

“Imported coal prices have gone up 200 percent year-on-year. Fuel prices are not coming down at all as well. So there is definitely pressure on pricing of the commodity even if demand recovers,” said Reddy.

Coal prices, however, have softened marginally on a sequential basis. “For a price hike to take place, both demand and input cost will have to be taken into consideration and to that extent we see prices being maintained going ahead rather than going up even if they have fallen in the last month,” said H M Bangur, managing director at Shree Cement.

Ultratech, Ambuja, Dalmia, ACC and JK Cement, among others, are large players in the domestic cement sector.

"Though input prices have seen some moderation recently, a sustainable improvement in demand/price is critical for the industry’s profitability going ahead. We remain hopeful of demand/price recovery in the coming months with the onset of a busy construction season," said the Emkay report.

Alongside, though cases of Omicron variant of coronavirus are on a rise in India, players are of the view that the variant is still at a very nascent stage to have any impact on cement consumption.

“We cannot discount the presence of this new variant but for it to have an impact on demand for cement, it (variant) needs to have a meaningful presence, which is not the case at this stage,” said Bangur.