Cement sales seems to have slowed down in April due to labour shortage and lack of demand from infrastructure companies. Softening demand has already led to fall in prices in few regions.
Mr Basanth Patil, Senior Research Analyst, Dalmia Securities, said infrastructure activities generally slow down in April as companies curtail fresh purchases in the start of new financial year.
“Demand may improve by three to four per cent in May and June. For this fiscal, we are expecting a subdued growth of 7-8 per cent,” he added.
With slowing demand, average all India cement price in May has fallen by Rs 10 per 50 kg bag to Rs 280 from Rs 290 in April. The drop in price was after a series of hikes implemented since January.
Intermittent rain in parts of the southern region and sluggish demand from big institutional buyers have pulled down sales in the western region. Besides, high lending rates in raw material and logistics costs have led to higher retail prices.
Leading cement manufacturers ACC, Ambuja Cement and UltraTech Cement have cut production in April compared to their March output. This was done to match the drop in demand. The increasing cost and slowing demand may pull down the capacity utilisation which was hovering around 76 per cent in March.
Profit margins
Profit margins of cement companies are expected to be under pressure as there is no major relief from rising cost. Passing on incremental costs to consumers will become difficult with the fall in demand, said an analyst. Analysts expect the demand to remain subdued in coming months before the South-West monsoon sets in.