After a weak September quarter, cement companies are trying to protect their profit margins by hiking prices even as e demand has shown early signs of revival with the government restarting spending on infrastructure projects.
Large cement companies have hiked prices by ₹8 this month to ₹342 per 50 kg bag on the back of a slight demand revival. The price hike was led by an increase of ₹23 per bag and ₹14 per bag in the East and North regions, respectively. The Central and southern regions witnessed a modest price hike of ₹3 per bag and ₹2 per per bag, respectively, according to data from Nuvama Research.
Dealers expect the fresh price hike in one of the largest western regions may not sustain due to low demand caused by elections in Maharashtra and the subsequent festival season.
Notwithstanding weak demand, cement companies have been ramping up production to maintain their market share even as higher sales erode margins.
Challenging Sept
Palka Arora Chopra. Director, Master Capital Services, said several cement companies implemented a notable price hike after a challenging September quarter, which marked by sluggish demand and margin pressures.
Several major companies have announced expansion plans, aiming to increase their production capacity to capture future growth and this could lead to a potential surplus supply putting pressure on prices, she said.
Post-monsoon construction activities have picked up fuelled by government-led infrastructure projects, particularly in roads, railways and affordable housing. But, the broader macroeconomic environment, including high interest rates, continue to pose a challenge for private real estate projects, which could affect the cement industry, added Arora.
Ashutosh Murarka, Cement Analyst, Choice Equity Broking, said over the past eight months, cement companies have faced weak pricing conditions caused by extended monsoons, general elections and delays in government projects.
However, he said, going forward cement company management anticipates a stronger government focus on infrastructure and rural development. Companies are not expected to offer further discounts to stimulate sales, as cement prices have already bottomed out and many are now prioritising value over volume, he said.