The uncertainty around Coronavirus’ impact on the construction sector is likely to keep cement prices flat in the coming months.
According to industry officials and sector analysts, although the effects of coronavirus aren’t yet felt in the construction sector, a prolonged crisis across business segments might impact cement industry as well and it is unlikely that prices will be increased under such volatility.
“Coronavirus’ impact is not felt as yet in construction activity. It is unlikely to be affected in the near term unless there is a major economic slowdown all across," Sandip Ghose, chief operating officer at Birla Corporation told Business Standard.
The World Health Organisation (WHO) has already declared Coronavirus as an endemic, India has opted for self-quarantine for a month, and stock markets have been reacting to the uncertainty around the economic impact of this virus as well.
“The market is falling as people are unsure what the future holds in wake of the impact of Coronavirus," Kunal Shah, analyst with Yes Securities said.
The BSE Sensex, from March 1 till March 11 has fallen by 6.41 per cent at 35,697.40 points. Analysts have also sounded caution especially on companies having exposure to retail, multiplexes, amusement parks and other public places. Electronic device manufacturers have also expressed their anguish over availability of components from China in wake of the temporary halt of trade with that country.
On the other hand, the construction sector is also likely to feel the jitters in case of a protracted domestic crisis due to the virus as it imports significant amount of products from China. It includes iron & steel, technical construction equipment, electronic equipment and others like plastic and fibre elements.
Industry officials are cautious of the combination of a stagnant economy and the Coronavirus threat.
“The demand has been recovering but this year, the growth will be much lower than what we had registered in previous years. On top of it, there is some uncertainty around Coronavirus but let’s see how it eventually reflects on the state of economy," an industry official said.
Additionally, any outbreak of a momentous scale could also lead to labour shortage as well which may impact construction activities.
Sector analysts are of the view that given the muted state of cement demand in the country, a price hike is unlikely in the near term.
“There may not be an increase but prices are expected to remain stable in the near term," Ghose said.
According to a report from broking firm Anand Rathi, across India, no price hikes were announced this month except the south and west while in the central region, encompassing Madhya Pradesh and parts of Maharashtra and Chhattisgarh, prices are expected to dip after a shortened increase in February.
“Our channel check show year-end targets and lost labour days due to Holi may pile pressure on cement prices in March," Anand Rathi said.
Industry officials believe that volatile market conditions will prevent companies as well as cement dealers from hiking prices atleast in the near term.