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Based on our discussions with dealers, sales executives, and C&F agents, it appears the beginning of Q4 has been relatively slow on demand, and this coupled with increasing supply has resulted in price weakness. The trend is contrary to the usual patterns that suggests a recovery in demand and prices in the second half of January. This is usually attributed to subsiding Winter conditions and acceleration of construction activities following Makar Sankranti in several markets. As a result, all-India average retail price declined INR 5 per 50 kg bag MoM to INR 382 vs an average MoM increase of INR 4/bag in January in the past three years.

The MoM movement in prices across regions was as follows: South India saw the highest price cut of INR 10/bag, followed by an INR 5/bag fall in East India, an INR 4/bag each fall in Central as well as North India and an INR 1/bag dip in West India. On the demand side, extreme Winter conditions and region-specific issues, such as festivals in South India and Gujarat, sand-related challenges in Odisha & Jharkhand, and delayed payment for government projects in a few states have contributed to soft demand in January. Market intermediaries expect cement firms to try hiking prices in the range of INR 5-30/bag in February.

Price softens in North, Central and East India by INR 0-10/bag

After a muted December, weakness in prices prevailed further in January in most parts of Central, North and East India. In Central India, prices in Uttar Pradesh were broadly stable but declined INR 5-10/bag in Madhya Pradesh. In East India, prices in Jharkhand fell INR 10/bag, followed by INR 5/bag dip each in Bihar, Odisha, and West Bengal. Chhattisgarh was flat MoM. In North India, prices in Delhi and Rajasthan fell INR 10/bag and INR 6/bag, respectively. Punjab was flat MoM.

Another weak month for South India

In line with other regions, South India pockets too failed to report improvement in January, as earlier attempts during the month to raise prices did not materialize. Thus, prices in Tamil Nadu fell INR 15/bag, followed by INR 10/bag each in Andhra Pradesh, Kerala, and Telangana. Karnataka saw a price cut of INR 5/bag. As per market intermediaries, there is an increased likelihood of price hikes of INR 25- 30/bag during early February.

In the West India region, Gujarat flat; Maharashtra mixed

Gujarat prices remain largely steady at December levels in January. On the other side, early January price hikes in Maharashtra were followed by partial rollbacks. Overall, prices at Nasik fell INR 5/bag while Mumbai and Nagpur were flat MoM.

Outlook: easing cost pressures to reduce impact of pricing pressure

The current international thermal coal prices are down ~31% vs the peak of mid-October, which will enable industry to reduce impact of falling cement prices. Demand is also expected to improve in the upcoming months as Winter recedes and due to pre-election spending.

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