*Cement makers eye price rise as demand improves, input costs bite – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/todays-paper/tp-news/cement-makers-eye-price-rise-as-demand-improves-input-costs-bite/article65294506.ece

South and Western markets expanded in double digits led by strong growth in Tamil Nadu, Kerala and Gujarat VELANKANNI RAJ B

South and Western markets expanded in double digits led by strong growth in Tamil Nadu, Kerala and Gujarat VELANKANNI RAJ B | Photo Credit: B_VELANKANNI RAJ

Cement-makers could be looking at a price hike of Rs. 15–50 per bag April onwards on the back of a sharp rise in input cost and improving demand.

Volume recovery in March saw around 25 per cent month-on-month growth (versus usual 15 per cent) and around 9 per cent y-o-y growth for FY22, despite high base and higher prices.

The average pan-India prices went up between 2 and 5 per cent month-on-month and 6–10 per cent y-o-y, say sources.

Demand recovery in March andthe low base of Q1 FY22 may result in a strong 10-15 per cent y-o-y growth during Q1 FY23E which augurs well for absorption of price hikes, ICICI Securities said in a recent report.

Expectations of a cement price hike in April could also have led to an increase in dispatches last month. Industry volumes should be up 3-5 per cent, y-o-y .

“Cement demand improved in most markets in March after remaining sluggish around December 2021 and for sometime in January,” Prashant Bangur, Director, Shree Cement, told BusinessLine.

Sources say South and Western markets grew “double digit” led by strong growth in Tamil Nadu, Kerala and Gujarat. North and Central Indian markets saw a “mid-single to high digit growth” led by demand recovery in Uttar Pradesh, post declaration of election results.

Price rise

Companies, some of the dealers say, have announced price increases of up to Rs. 50/bag across regions to mitigate these cost escalations.

For instance, in some of the North, West and Central Indian markets, a price hike of Rs. 15-20/ bag has been announced; while in South and Eastern regions , the price hikes are steeper at Rs. 50 per bag. Analysts peg March 2022 exit prices of cement to be up by 2-3 per cent.

Input costs jump

According to Bangur, input costs have continued to rise sharply and are up by nearly Rs. 60-70 per bag (inclusive of 28 per cent GST) on a six-month basis.

Imported coal prices and domestic pet coke prices are up by 50 per cent (above Rs. 400/ tonne impact) over the past two months owing to unfavourable geopolitical scenario, while retail diesel prices rose 10 per cent from mid-Mar 2022 (hovering around Rs. 100 per litre mark).

Domestic petcoke prices rose 21 per cent month-on-month to Rs. 21,816 per tonne (5 per cent above its peak of Rs. 20,781/ tonne in November last year).

“Accordingly, variable costs are expected to remain elevated for some months. There really is no outlook as to the time frame till when such fluctuations in input costs will continue,” he said.

Shree Cement, Bangur maintained, had a 2–4 month stock of coal; and as new higher priced coal comes in, there will be further pressure on cement prices. ICICI Securities in a report said, sharp fuel cost increases are usually “transient” and corrected over 4 to 6 quarters as seen in the past during 2008-09, 2011-12, 2014, while price increases have remained more stable.

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