Cement prices likely to drop by 1-3% despite healthy demand: Crisil

The cement prices are likely to drop down by 1-3 percent in the current fiscal, despite healthy demand, according to a Crisil report, the Livemint reported.

This decline in cement prices comes after a compound annual growth rate (CAGR) of 4 per cent in the past four years, which pushed prices to a record high of Rs 391 per 50 kg bag in the previous fiscal year, the report said.

The Crisil report highlights the increasingly competitive environment within the industry.

The prices of cement have shown moderation since the beginning of 2023 which can be attributed to the gradual softening of energy costs and manufacturers' efforts to gain market share in a seasonally strong fourth quarter.

Average prices declined by 1 per cent to Rs 388 per bag during the fourth quarter of the previous fiscal year despite carrying high-cost inventory. Even though when compared to the previous year the prices were elevated.

According to the report, for the first time in many years, there were no pre-monsoon price hikes in April and May of the current fiscal year, despite steady demand. Also, the top five players in the market accounted for a 55 per cent volume share in the previous fiscal year, as against 49 per cent of pre-Covid-19 times.

Quoting Hetal Gandhi, director of research at Crisil Market Intelligence and Analytics, the report said that Crisil MI&A Research expects cement demand growth to be strong at 8-10 per cent year-on-year this fiscal, which is also the pre-election year.  According to Gandhi, the prices are set to decline by approximately 2 per cent year-on-year to Rs 382-385 per bag, pulled lower also by relatively moderate growth in the trade segment.

The report further highlights the favorable scenario on the input front as a decrease in Australian coal prices, coupled with easing international and domestic pet coke prices, is likely to result in lower cement prices.

The expected corrections in diesel and crude oil prices are likely to provide the cement industry some relief from the burden of high costs and declining profitability, the report said.