February cement sales improved year-on-year on higher rural housing demand — beating the slowdown in infrastructure projects in select regions across the country. However, month-on-month sales declined due to fewer working days in the month compared to January.
The sales jump over the year-ago period was chiefly attributed to revival in housing projects after the Reserve Bank of India signalled a softening trend in lending rates by reducing the cash reserve ratio by 50 basis points in January. The indication was that the interest rate cycle had peaked and that there would not be any further rate hikes, encouraging construction companies to raise funds for new as well as ongoing projects.
DISCOUNTS BOOST SALES
In a bid to boost sales, cement companies also offered special discounts to dealers in the second half of the month following a drop in coal prices. Coal India has de-linked domestic coal prices from the international rates until March. This resulted in lower prices for certain grades of coal used by the cement industry. Operational costs of cement companies, however, may increase if the oil companies mark up diesel and petrol prices. This may lead to a hike in cement prices.
Mr V. Srinivasan, Research Analyst, Angel Broking, said demand has been good over the last few months , especially in the northern and western regions.
“With improved demand, cement manufacturers may not find it hard to pass on the incremental cost to the end consumer,” he added.
Cement prices are already ruling high in the western region, with a 50-kg bag being sold at Rs 320 in Mumbai. The trend has been similar in Gujarat.
While rural demand in Punjab, Haryana and Rajasthan have witnessed double-digit growth , the rush to complete mass housing projects ahead of Assembly elections in Gujarat in November, is cushioning sales in the Western region, said a dealer.
Cement demand in the South has also revived, with the Tamil Nadu Government allocating funds for new infrastructure schemes. A mass housing project the State announced recently will drive consumption in the months ahead, the dealer said.
A pause in the Telangana agitation and increased demand from the housing segment seems to have revived the overall demand in the Southern region.