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Price hike of INR30-35/bag implemented in the East from Sep’23 beginning

* Despite a seasonally challenging period, the all-India average cement price declined slightly by 0.6% MoM (INR2 per 50kg bag) in Aug’23 and remained flat sequentially in 2QFY24 (QTD). Our interactions with various dealers suggest that cement manufacturers have raised prices by INR30-35/bag in the East from the beginning of Sep’23 while, there has not been any price hike in other regions until now.

* A further price hike of INR30/bag has been announced in a few markets of the East effective from 11th Sep’23. However, absorption of this price hike/sustenance of the previous hike should be monitored closely given the upcoming festive season and the high competitive intensity in the region.

* Cement demand remains buoyant due to weak monsoon, elevated pre-election spending, infrastructure development and sustained demand from real estate as well as capex-intensive industrial projects. Cement volume is estimated to be up ~7% YoY in Jul’23; whereas, it is likely to be higher by 10-12% YoY in Aug’23.

* Fuel prices (both petcoke and imported coal) rebounded in Aug’23 and surged ~11-13% MoM after witnessing corrections since the beginning of CY23. However, the spot fuel prices remained ~12-16% lower as compared to 1HCY23. 

Pan-India average price down 0.6% MoM, but up ~3% YoY in Aug’23

* Cement prices dropped INR3-5/bag in the North, West and South regions, while remained flat in Central and East regions during Aug’23. All-India average cement price declined marginally by 0.6% MoM (INR2 per 50kg bag) in Aug’23, although it remained flat in 2QFY24 (QTD) sequentially.

* In the North (mainly in Rajasthan), price fell INR10/bag (~3%) MoM in Aug’23 after an increase in the previous month. Prices in other North markets (Punjab and DelhiNCR) remained flat MoM in Aug’23. Prices also remained flat in the Central region.

* In the West, cement price dropped in Maharashtra by INR10/bag (~3%) MoM in Aug’23 for the second consecutive month. While, in Gujarat prices remained flat MoM in Aug’23.

* In the South, prices dipped in Tamil Nadu and Kerala markets by INR5-10/bag (1-3%) MoM in Aug’23 while remained flat in other markets. Price in the East remained weak in Jul-Aug’23, as a price hike announcement was ineffective due to subdued demand during monsoons and higher competitive intensity.

* However, cement manufacturers have raised prices by INR30-35/bag in the East from the beginning of Sep’23 and another hike of INR30/bag has been announced w.e.f. 11th Sep’23. While, in other regions price hikes are yet to be taken.

* In the initial period, the price hike implemented in the East in the starting of Sep’23 has sustained. However, absorption of further price hike should be monitored closely given the upcoming festive season and high competitive intensity. 

Cement demand should be up 10-12% YoY in Aug’23

* In Jul’23, cement demand was hit by heavy rains; however, demand rebounded strongly in Aug’23 due to low rainfalls and strong underlying demand from infrastructure projects and urban housing. Cement volume is estimated to be up ~7% YoY in Jul’23; whereas, it is likely to be higher by 10-12% YoY in Aug’23.