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Research
CRISIL MI&A: Cement prices to dip 1-3% this fiscal despite healthy demand
Posted On : 2023-06-20 22:44:36( TIMEZONE : IST )
Prices to remain in check amid cooling costs and intensifying competition
Cement prices are expected to slip 1-3% this fiscal, after clocking a 4% compound annual growth rate (CAGR) over the past four to a new all-time high of Rs 391 per 50 kg bag last fiscal.
The run-up was due to disruptions caused by Covid-19, followed by a sharp surge in input costs, especially thermal coal, further aggravated by the Russia-Ukraine war.
Now, heightening competitive intensity and softening input costs are set to reverse the trend.
To be sure, prices have moderated since early 2023 on the back of a gradual softening of energy costs and efforts of manufacturers to gain market share in a seasonally strong fourth quarter. Prices fell ~1% to Rs 388 per bag on average in the fourth quarter of last fiscal sequentially, despite manufacturers carrying high-cost inventory. On an on-year basis, though, prices have remained elevated.
The heightened competitive intensity can be gauged from the fact that, for the first time in several years, there were no pre-monsoon price hikes in April and May this fiscal despite steady demand. The push to improve market share is evident from the top five players comprising 55% volume share last fiscal compared with 49% pre-Covid-19.
Says Hetal Gandhi, Director - Research, CRISIL Market Intelligence and Analytics, "CRISIL MI&A Research expects cement demand growth to be strong at 8-10% on-year this fiscal, the pre-election year. This, however, will not propel prices up. On the contrary, prices are set to decline ~2% on-year to Rs 382-385 per bag, pulled lower also by relatively moderate growth in the trade segment."
Says Koustav Mazumdar, Associate Director - Research, CRISIL Market Intelligence and Analytics, "After the highs of $344 per tonne in fiscal 2023, Australian coal prices are forecast to decline to $150-200 per tonne this fiscal. Dated Brent Crude is also expected to correct over 17% in 2023, with diesel prices falling in tandem with crude oil prices in the latter half of the fiscal. Easing coal, petcoke and diesel prices will come as a relief for the cement industry, which was reeling under high costs and deteriorating profitability."
