Cement Prices in India: Current Trends and Future Projections
The cement industry in India is at a pivotal point, with prices anticipated to increase in the latter half of the year. Analysts have indicated that the price of a 50kg bag of cement could experience further escalation as infrastructure projects gain momentum, especially following the allocation of pending budgets. Despite the forthcoming assembly elections, experts believe that political events will not significantly influence the pricing strategies of cement companies.
Brokerage Insights on Cement Prices
After a protracted decline in prices, cement manufacturers initiated a price hike of Rs 10 to Rs 20 per bag in mid-August. A report from brokerage firm Motilal Oswal highlighted dealers’ sentiments that the increase may only be partially sustainable. Factors such as erratic rains, heightened competition, subdued demand in the non-trade sector, and the festive and wedding seasons could disrupt demand and affect cement pricing stability.
Demand Trends and Seasonal Influences
Several elements, including the general elections, intense summer heat followed by heavy monsoon rains, have adversely affected the demand growth for cement. According to an analysis by Elara Securities, the average cement price across India plummeted to a 51-month low between late July and early August. Although September saw mild recovery compared to August, seasonal factors like Pitru Paksha, viewed as an inauspicious time for initiating new projects, continued to curtail demand.
Future Demand Recovery and Industry Growth
Encouragingly, analysts project a steady recovery in cement demand in the latter part of the year, driven primarily by a surge in infrastructure initiatives. Elara’s analyst, Ravi Soda, notes expectations of gradual recovery in demand, along with improved profitability as the market stabilizes. Central government projects, such as the construction of over 800,000 homes under the Pradhan Mantri Awas Yojana (PMAY), particularly in states like Chhattisgarh, may significantly elevate demand for cement.
Impact of Political Climate on Cement Prices
When considering the interplay between politics and cement pricing, Uttam Shrimal of Axis Research asserts that market dynamics of demand and supply predominantly dictate prices. Upcoming assembly elections are not perceived to have a major impact on price levels. Projections suggest an increase in prices ranging from Rs 5 to Rs 15 per bag across various markets by October. Moreover, the government’s anticipated announcement of an additional 2 crore housing units under PMAY (Rural) over the next five years is expected to further stimulate the cement sector growth.
Cement Demand Growth Forecast
According to Axis Securities, cement demand during the fiscal year 2024 demonstrated a robust growth of 9% compared to the previous year. However, expectations for FY25 indicate a slowdown to around 6-7% growth rates, attributed to the high base effect from recent fiscal years. Nevertheless, long-term forecasts are optimistic, with projected growth rates of approximately 8% in the upcoming years. This growth will be buoyed by strong demand from infrastructure and housing sectors and ongoing industry consolidation, as major players like UltraTech Cement, Adani Cement, and Dalmia Bharat continue to acquire smaller firms to reinforce their market positions.
