Indian Cement Industry Resorts To Price Hike Despite Demand Slowdown

New Delhi, Aug 28 (KNN) In a significant move that could impact the construction sector, cement manufacturers in India have begun implementing phased price increases, starting with a hike of Rs 5 to Rs 10 per bag last week.

Industry insiders reveal that an additional increase of Rs 10–15 per bag is expected within the next fortnight, potentially extending through mid-September.

This price revision comes at a time when the construction industry is experiencing a slowdown, partly attributed to the recent Lok Sabha elections. Earlier attempts to raise prices in May and June were thwarted by weak market demand and lack of consumer acceptance.

A market participant, speaking on condition of anonymity, told businessline, "Post mid-August, cement makers have initiated a hike of Rs 5 – Rs 10 per bag depending on the region and the cement category.

However, the market's response to these hikes remains uncertain, with demand generally slow during the July-September quarter."

The price hikes vary significantly across regions. While the Eastern markets have seen a modest increase of Rs 5 per bag, Southern regions are experiencing more substantial hikes of Rs 20 – Rs 25 per bag.

Current prices range from Rs 305 per bag in the East to around Rs 370 per bag in Central India, reflecting a 3-4 per cent decrease from Q1 exit prices and a 6-7 per cent year-on-year decline.

Industry experts anticipate a potential uptick in cement demand with the approaching festive season and as the market enters the second half of the year.

"Cement producers are aiming to restore prices to the levels seen at the end of Q4 FY24," a cement manufacturer stated, highlighting the industry's strategic objectives.

A recent report by Motilal Oswal consultancy firm indicates that the price hikes are "necessary to restrict earnings downgrades" in light of persistent pressure on cement prices over recent months.

The report notes that cement prices have corrected for nine consecutive months from November 2023 to July 2024, with the all-India average cement price down 13 per cent in July from its October peak.

The cement industry's realisation for the April-June quarter was notably weak, with average realisation declining 3-4 per cent quarter-on-quarter. This trend underscores the challenges faced by cement manufacturers in maintaining profitability amid fluctuating market conditions.

Despite these challenges, industry analysts point to a silver lining: the ongoing consolidation in the sector.

With the top five players now holding nearly 54 per cent of the capacity market share, experts believe this concentration could lead to improved pricing discipline in the long term.

(KNN Bureau)