Cement prices slip below Rs 300 per 50 kg bag

Barring south, all markets see decline; west sees steepest fall

Displaying unusual weakness since this financial year (2015-16) began, the poor demand for cement has prompted industry experts to claim manufacturers will lose pricing power if this continues.

All-India average prices have slipped nearly two per cent in April. A 50-kg bag is now sold for Rs 297, compared to Rs 302 earlier.

Traditionally a high demand season, the decline has been caused by unexpectedly poor demand.

Sector analysts said in the earlier quarter (January-March), demand was negative, against expectations of eight to 10 per cent rise.

ACC has already reported a dip of 10 per cent during the quarter. Other companies are expected  to report similar figures.

Three markets, in particular — east, west and central — are the worst hit. In the western market, comprising Gujarat, Maharashtra and southern Rajasthan, prices have dropped by Rs 22 to Rs 285 a bag.

The central region witnessed a drop of Rs 6 to Rs 253, while the eastern market saw a price decline of Rs 4 to Rs 310 so far this month.

“Prices had seen a steep increase in the quarter ended March, on expectations of demand rise. However, it could not sustain as demand failed to pick up,” said Piyush Jain, research analyst, Morningstar India. March saw a steep fall in demand, forcing players to cut prices.

Jain added the current year could be a washout in terms of demand and companies will lose control over pricing.

The northern region continues to see pressure on prices. It is now Rs 263 a bag. A weak monsoon last year and widespread unseasonal rain for the past month in the north and central parts is likely to further push demand down, especially from the non-urban belt.

The southern region is the only market where prices are much higher, around Rs 370.

“Rural demand is set to go for a toss. The first half of this financial year will be tough,” said a Mumbai-based analyst with a local brokerage. “In the absence of big projects, it depends a lot on the government’s spending to boost cement demand.”

Capacity utilisation also declined in 2014-15 to 72 per cent against 74 per cent in FY14. There were expectations that due to demand pick-up, utilisation will reach 78 per cent. The mismatch between supply and demand continues.

The sector has a total capacity of 380 million tonnes per annum. Consumption is 100 million tonnes less at 280 million tonne a year.