A channel check with cement dealers indicates that cement prices have remained resilient in July. It is impressive considering that the prices have remained stable during the monsoons. COVID-led demand disruptions could be the major reasons that kept the demand up for cement in a historically weak season.

Share Market Live

NSE

Cement Prices Moves with the Course of Monsoon

Channel checks have indicated that all-India cement prices declined 2 percent MoM in July 2021. It was primarily led by a 5 percent MoM decline in prices in the South, where monsoon has remained strong. Price reversal is also on the back of a sharp 11 percent MoM hike in June 2021. Hence, considering on a two-month basis, cement prices still remain 6 percent up from February 2021 levels.

Among other regions, prices in North and East markets increased 1 percent MoM, which witnessed a prolonged dry spell. Prices remained stable in Central and West, where monsoon season came to a halt after an impressive beginning.

Demand Sustained During and Post the Second Wave

While July data is still awaited, trade demand was strong in June. If stable pricing is giving any indication, demand in July is also expected to remain strong across the country, except for the southern region where a strong monsoon could have played its part.

As per the Department of Industrial Policy & Promotion (DIPP), overall cement demand in India was up 100 percent YoY during April-May 2021. It indicates that the impact of the second COVID-19 wave was mild when compared to the first one.

Strong demand during the second wave could be attributed to the continuation of large infrastructure projects. Demand was particularly strong in East and Central India, and it outperformed other regions. While heavy rains and high cement prices impacted demand in western and southern markets to an extent.

Costs Continue To Inch Up

Higher commodity costs have also acted as a major factor in keeping cement prices elevated. Energy prices and freight costs have remained in an uptrend in July 2021. Pet coke prices have inched up to US$145/ton in July 2021. International coal prices are also up 3 percent MoM in July 2021 and 14 percent QoQ in 1QFY22. Diesel prices, too, are up 9 percent QoQ in 1QFY22, keeping freight costs in an uptrend.

Closing Comments

Stable cement prices during and post the second COVID-19 wave will help the companies to protect their margins. Further price strength will be determined by the movement in commodity prices. The revival of monsoon is also going to be an important factor. It will determine demand stability and put pressure on prices for the rest of the monsoon season.

The author, Vaibhav Agrawal, is CIO at Teji Mandi. The views expressed are personal