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All India cement average prices increased by Rs2/bag on m-o-m basis in Jan’25

All India avg. cement prices was up by Rs2/bag on m-o-m basis in Jan’25 but remains down by Rs13/bag y-o-y from Jan’24. The highest price hike has happened in northern region (+Rs5/bag) followed by few states of central region (Rs10/bag Lucknow and Rs1/bag Indore), western region (+Rs5 Ahmedabad but Mumbai / Pune flattish) and eastern region (only +Rs3/bag in Kolkata), while few pockets in southern region (flattish m-o-m) was trying a price hike but didn’t sustain for more than 2-3 days. January price hike in some states and sustaining in market looks positive, however Feb-Mar may witness neutral to negative price trend due to 1). Year-end volume push, 2). Labour availability issue due to Corp harvesting season, and 3). Upcoming Holi festival. On these backdrops, we are more concerned with rete difference (RD) status for the industry as most of the company would release the RD amount (Incl. monthly, quarterly, and annual) to dealers and distributer in 4Q. Also, the December’s RD is not yet released in most of the states. Therefore, this may impact the profitability in 4Q. Dealer and distributors are in-line with our views on pricing and demand for the industry “we assume the demand may be better in 4Q ( a volume driven quarter for the industry) as compared to 3Q, but may not see any mid-teen digit/ double digit y-o-y volume growth in 4Q.” especially southern and eastern region would remain weak in terms of volume and prices due to high competition and trust to gain quick market share by larger players. While north and central prices may witness flattish to marginal increase in pricing as compared to west in 4Q (we don’t see any meaningful price hike in FebMar’25). As of now we haven’t observed much progress in government infra projects, however, major change/ impact would be seen from the upcoming budget announcement.

On the in-put cost front, diesel prices are remained stable over last twelve months at avg. cost of Rs90.5paisa/ltr which gives some respite to logistic cost, also there may not be any railway busy season surcharges in Feb-Mar likely to provide comforts. Avg. domestic pet-coke prices have increased by 3% MoM in Jan’24 followed by ~5% increase in Dec’24 MoM to Rs13000/tn and ~7% YoY down from level of Rs14000/tn in Jan’24. however, the drop in prices have slowdown in past three quarters looks bit ambiguous and may see marginal spike in near-term. For our analysis, we are considering coal realization reported by Coal India Ltd in BSE filing for “3QFY25” as benchmark. Coal India Ltd (CIL) e-auction prices were up by ~7.6% in 3QFY25 followed by 2.5% increase in 2QFY25 on QoQ basis due to coal scarcity. Avg. imported coal prices (AUS - Newcastle coal prices - 6000kcal/kg) remained flattish MoM basis but increased by 11% YoY to USD137/tn in Jan’25 vs. USD124/tn in Jan’24. While imported pet-coke prices increased by ~4% to USD130/tn in Jan’25 vs. USD 125/tn in Jan’24. The marginal spike in international pet-coke and coal prices would adversely impact P&F cost in 4QFY25E.

Our View: The pricing weakness to persist further until major capacity addition or consolidation in the industry gets over. The price hike in Jan’25 (mere of +Rs2/bag) m-o-m followed by Dec’24 (+Rs7-8/bag) has sustained yet amidst weak volume, pricing pressure and intense competition looks good. But one need to understand the rate deference amount which is yet to release the dealers and distributor. We don’t see any significant price hike in near-term due to sluggish demand. 4Q is a year-end volume push quarter which may lead to pricing pressure. Any significant announcement in the upcoming budget with respect to infra capex may bring positive sentiment in the industry.

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