October 2023: Prices Surge In India's Cement In Non-Trade Market

In October 2023, India’s Cement industry witnessed a significant surge in prices, closing the month on a strong note. Various regions in the country reported price hikes in the Non-Trade market, contributing to an overall increase in Cement prices by around Rs 10-60. Let’s explore the price trends, regional variations, and the potential impact on the industry.

Regional Price Trends

Here are the details:

• East: Cement prices in the eastern region displayed mixed trends. While the second price hike in September was partially held in Patna, it was reversed in Kolkata. Confusion prevailed in the market, with Cement companies not specifying reference rates. However, demand improved in October after a lacklustre September 2023.

• North: Cement prices in the northern region saw a hike of Rs 10-15/bag in mid to early October, sustaining throughout the month. As of now, dealers reported no price hike announcements for November 2023, likely due to labour shortages caused by the festival season and state elections. October demand was robust, driven by pre-Diwali construction activities.

• Central: Prices in Lucknow remained stable in October, but they increased by Rs 5-10/bag in MP’s capital- Bhopl and Indore. A price hike of Rs 5-10 has been announced for Bhopal in November, with no announcements yet for Lucknow and Indore. Dealers in Bhopal expect weaker demand in November due to state elections.

• South: The southern region witnessed substantial price increases of Rs 30-60/bag in Hyderabad and Chennai in October. Some month-end discounts of Rs 10-15 were offered to boost volumes. Producers have announced a price hike of Rs 20 for November. Bengaluru saw a price increase of Rs 20/bag in October, with no price hike announced for November. Dealers in the south anticipate a softening of demand in November due to festivals and state elections.

• West: Prices increased in Maharashtra and remained stable in Gujarat in October. Pune saw a hike of Rs 10/bag, while Mumbai experienced a hike of Rs 15-30/bag. In Gujarat, announced price hikes were not implemented. Despite this, demand was good in both states for October. Producers have announced a price hike of Rs 15-20 in the region, but dealers are skeptical of implementation due to the upcoming festive season.

Price Trends

Pet coke and Coal prices in the international market have stabilized with a slight hike in October 2023, following two months of increases. This stabilization is expected to have a positive impact on energy costs for the Cement industry in the third quarter of the fiscal year 2024.

Price Estimate & Demand Trend

Cement prices increased by approximately 5% month-on-month in October 2023, following a 4% increase in September. This growth is driven by improved discipline in the south, east, and north regions. The all-India average price increase stands at around 7% quarter-on-quarter for the third quarter of fiscal year 2024, surpassing expectations. If these price hikes are sustained, they will significantly boost earnings in the second half of fiscal year 2024, even when factoring in recent cost trend reversals.

While demand growth improved in October, it may be attributed, in part, to the base effect from last year when Diwali fell in October. Despite this, the industry maintains its expectations of double-digit growth for the fiscal year 2024, supported by a robust first half.

Market Outlook

The current stability in raw material prices suggests a positive outlook for the country’s Cement industry. A dip in demand is anticipated for the third quarter of fiscal year 2024, leading to a potential decline in sales volume. Nevertheless, the Cement industry shows promise due to increased investment in the country’s infrastructure and construction sector, contributing to overall market growth.

OFB’s Insight 

India’s Cement industry saw a substantial increase in prices in October 2023, providing a positive outlook for the coming months. However, upcoming challenges such as the sustainability of prices and energy cost fluctuations, as well as the impact of festivals and state elections on demand, will require careful monitoring in the industry.