Indian Cement Industry Faces Pressure Due to Low Sales and Pricing; What’s Next?

Recent reports on the Indian cement industry  for FY24 showed  major cement producers from India, such as UltraTech, Ambuja, Shree Cement, Mangalam, and Orient Cement, record modest numbers, making the industry cautious.

Even though a few major companies met or exceeded their anticipated targets in Q4 FY24, the remainder of them were not able to achieve their goals. This was mainly due to less realisations by the company on account of slow sales in the domestic market. Read more about the prospects of the cement sector…

Slow Sales and Less Price Support in the Cement Sector

With the beginning of Q1 of FY25, i.e., April, slow sales were reported for cement, with the industry showcasing a muted performance, as per the dealers’ report to OfBusiness.

Ongoing slow sales and less support in cement pricing are resulting in notable challenges for the sector. Thus, analysing the weak beginning of the quarter, there are assumptions that Q1 of FY25 results may remain less favourable as cement prices remain under pressure due to limited sales or less-than-expected orders.

Uncertainties Put Pressure on Cement Manufacturers

March to May periods generally a favourable season for construction activities, hence, very supportive for the cement industry till the monsoon arrives in June-July. Once the monsoon starts, construction typically slows down. However, since elections are going on in the country at present, the industry is compelled to underperform even in the favourable season of March to May.

According to industry leaders, constrained release of funds by the government and a shortage of labour have disturbed construction works. Despite expectations of strong performance for the new financial year, the ongoing uncertainties have kept bullishness in check.

Expectations for the Cement Market

Analysts from several rating agencies express skepticism about a significant uptick in demand and pricing until the election results are declared. The looming monsoon season adds another layer of caution, suggesting a possible recovery in the second half (H2) of the FY25.

Based on dealers’ reviews, the cement industry has indicated weak volumes for April and is likely to remain flat to lower year-on-year.

The slowdown in construction activity due to the elections is reported to be a primary factor behind these trends. Additionally, attempts to hike prices at the beginning of April have not been sustained, reflecting the cautious market sentiment.

There has been only a moderate 1-2% month-on-month price increase in April, with prices still lower sequentially for the quarter so far. Dealers are concerned about the market trend, thus, they aren’t expecting any immediate price hikes until after the election, with some speculating possible hikes in June which seems to be less proven.

Market Outlook for the Cement Sector

Overall, the combination of weak pricing and volume is expected to dampen the FY25 first-quarter earnings, despite potential offsets from softening input and variable costs, as well as cost-saving initiatives by the companies. As the industry is facing challenges, cautious optimism prevails, with a major view set to see post-election period demand for potential market movements.

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