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Below the Quote on Cement Sector Update : Region-wise channel check - Slight uptick in prices, demand yet to pick up convincingly by Tushar Chaudhari, Research Analyst, PL Capital Group - Prabhudas Lilladher

We interacted with a few cement dealers across regions to gauge the demand and pricing scenario. Our interactions revealed that demand continues to remain under pressure due to subdued infrastructure activity in many areas. Kolkata in the East faced the most pressure, with prices falling by Rs30/bag MoM. In contrast, price decline in Chennai positively influenced demand. Prices in Mumbai, Lucknow and Delhi remained flat. Other regions saw a marginal increase of ~Rs10/bag. Looking ahead, demand is expected to improve, supported by the improving visibility of government infrastructure projects. However, the winter season in the North and pollution-related restrictions in Delhi could dampen volumes in the region.

Few takeaways across regions:

North region: Prices in Delhi remain flat in Nov’24 affected by pollution-related restrictions on construction. Under GRAP 3 restrictions, construction activities in Delhi are prohibited until further notice. This has led to a decline in cement demand. In contrast, prices in Jaipur have increased by Rs10/bag. Demand remains moderate to sluggish, partly impacted by the wedding season, which has affected labor availability. Further, there has been some relief in sand costs, which have reduced to Rs1,500–1,550/t from Rs1,600–1,800/t. According to dealers, consumer spending on construction activities remains subdued.  

South region: Prices in Chennai have declined by Rs10/bag to Rs290/bag in Nov’24. Tamil Nadu was one of the most affected regions; however, price decline has led to a slight uptick in demand MoM. In Hyderabad, prices have increased by Rs15–20/bag, reaching Rs320–325/bag. According to dealers, delay in the commencement of new projects in Telangana continues to exert pressure on demand. High real estate inventory, low demand for housing, limited market liquidity, and minimal government spending on infrastructure have also contributed to subdued demand in the state.

East region: In Patna, cement prices have increased by Rs10–12/bag in Nov’24, from Rs250/bag to Rs260/bag. While this reflects stable demand, prices are expected to see minor cuts in Dec’24 as dealers may lower rates to meet their year-end sales targets. This seasonal adjustment could put pressure on prices despite the recent hike. In Kolkata, cement prices range from Rs310–315/bag, down by Rs25–30/bag MoM. Demand remains weak due to a slowdown in infrastructure and real estate projects, along with a lack of new state government initiatives and delayed contractor payments. Dealers are generally pessimistic about recovery, with little improvement in demand expected next month.

West region: In Ahmedabad, cement prices have increased by Rs10/bag. Further hikes are expected in the coming months led by a positive demand outlook. Demand picked up post-Diwali and is anticipated to improve further in Dec’24 driven by construction activities. This uptick in demand is likely to support price increase, with expectations for a more favorable market in the near term. Cement prices in Mumbai remain flat in Nov’24, with demand subdued due to the Maharashtra Assembly elections. The absence of government projects has also impacted volumes. However, dealers anticipate an improvement in demand in Dec’24, driven by the formation of a stable government focused on infrastructure development.

Central region: Cement prices in Lucknow remain flat, with demand showing a slight uptick compared to the monsoon quarter. Looking ahead, sales may be affected in Dec’24 due to the cold weather. Intense competition in the market is also limiting price increases. Cement prices in Bhopal have risen by Rs10/ bag, but demand remains subdued, albeit slightly better than the monsoon period. The sand supply issue has been resolved, which had previously impacted the market. However, the cold weather is affecting labor efficiency, slowing construction progress. Additionally, the lack of new projects continues to limit demand, preventing a more significant uptick in sales.

PL View:  Ongoing wedding season, extreme weather conditions, pollution restrictions and lower infrastructure activities due to delays in government-funded projects can play spoilsport for demand in the near term. However, with the recent convincing victory in Maharashtra elections, we expect significant uptick in government-funded projects across the state going forward, as next election in the country is a few months away. We expect cement demand to improve in 2HFY25 on the back of GoI push on infrastructure, better monsoon aiding rural economy, and stable urban housing demand. Top Picks: UTCEM/ACEM/ACC

Exhibit 1: Region wise pricing details

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