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Cement and steel firms hike prices as construction demand picks up

Some industry players, however, warn that price recovery is supply-led and not demand

Ishita Ayan Dutt & Avishek Rakshit  |  Kolkata 

Construction firms, steel firms, cement firms
Construction firms, steel firms, cement firms

Prices of steel and cement are showing early signs of recovery led by low inventory level at the user end and a pick-up in construction activity post-monsoon combined with festive buying.

Steel companies have increased prices of flat steel in November by Rs 500-750 a tonne and long steel up to Rs 1,000 a tonne after a gap of more than seven months.

Cement prices, too, moved up last month in all regions except South India, which witnessed a decline; in Central India, it stagnated. Prices in South India have persistently remained muted since the monsoon and remained so even after the festive season.

The price rise in other parts of the country, especially in Gujarat, Punjab, Haryana, Uttar Pradesh, East India and some pockets in the southern belt like Chennai, Bangalore, Kochi and others, helped pull up the average prices by around four per cent post-monsoon.

Sales volume in North, East and West India is much higher than South India.

Recovery in is largely led by low stocks in the trade as well as higher international prices.

T V Narendran, chief executive officer and managing director, Tata Steel, said, profitability of the industry ensured that there was not much room to drop the prices further.

“Scrap prices (ex-US) started moving up in early to mid-October, pushing up rebar and sponge prices. Also, stocks of steel are low in trade and consumer network as well as import volumes have dropped. There are some positive signs from pre-festive buying and rural markets,” he said.

Jayant Acharya, director (commercial & marketing), JSW Steel, also said that prices had hit their bottom. “International prices have moved up by $25-$30 a tonne. As a result, domestic prices are at a discount of 6-7 per cent to imports. Additionally, inventory in the domestic channel is much lower,” he said.

At the retail end, there was some destocking in auto. “There is also resurfacing of funding in refinery and road projects,” Acharya said.

Some industry sources, however, cautioned that the price recovery was supply-led and not demand. But they are hoping that an increase of Rs 750 a tonne may be possible in the next month also.

Acharya said it is too early to say whether prices would be increased next month but expected the situation to be much better next quarter.

Narendran also said India has been a price setter in the South East Asian market. Therefore, prices in the region have gone up.

had been flattish during the monsoon with construction activities having stopped and government projects coming to a halt.

A prolonged rainy season further worsened the demand situation.

However, average prices have been moving up since August. In the northern region, prices increased marginally by Rs 5 a bag since August which took the average to Rs 325-335 although volume has declined by 5-7 per cent. While the demand is driven largely by the individual home buyers, an uptick was noticed after Diwali.

Industry officials are of the view that prices will not decrease any further. They are of the opinion that demand from individual home buyers, backed by a higher disposable income as a result of good monsoon, has led to revival in demand. But government buying still remains muted.

“We believe that after a good harvest and investment returning to the housing, infrastructure sectors and with increased government spending in rural housing and roads, one will see a distinct pick up in the core sector,” said Sandip Ghose, chief operating officer at MP Birla Cement.

H M Bangur, managing director at Shree Cement, as well as Ghose, are of the view that the price increase will continue on an uptrend in the near term.

“Overall, there has been around four per cent price increase on both year-on-year basis as well as on a sequential basis after the monsoon and the festive season. Prices are going to be sustained and there is no way prices will go down further on an average,” Bangur said.

In the eastern part of the country, similar to the North, prices have been increasing since September to around Rs 315-325 a bag while in the West, prices improved since the last month to go up between Rs 325 and Rs 335. In both these regions, dealers expect a further increase by Rs 10-20 per bag this month.

“The price corrections are market-led and according to the normal trend of demand uptick post monsoons and festival months. The increase is nominal – so we expect it to sustain,” Ghose added.

Industry officials noted that demand was expected to improve from November when largescale construction activity will pick up and government spending, especially in the rural sector, is expected to help push demand.

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First Published: Mon, November 11 2019. 21:45 IST
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