Cement Companies Hikes Cement Prices Ahead Of Monsoons

The cement companies in the northern region have again hiked the cement prices by Rs 10 on per 50 KG Bag.  The hike in the cement prices has come after a price cut of Rs 5-10 in the month of April due to lower cement demand from the infrastructure and construction industry which faced a major issue of labour and sand availability halting major construction works. The situation has not changed much in the month of May however labour issues has been sorted out to a certain extent as workers were seen returning after the summer vacation.

We believe the hike in the cement prices has come on the back of high freight cost and high coal prices. Coal prices are already up by 50% on YoY basis and freight rates were increased by the railway from 20% to 30%.  Both the cost has impacted the margins of the cement companies which have been passed on to the consumers.

The hike has come just before the arrival of the monsoon where cement companies generally go for a price cut due to weak demand from construction sector which slows down due to monsoon.  Cement industry reported strong numbers for the March quarter 2012 mainly on account of the hike in the cement prices and uptick in demand.

However from the month of April we have seen a sharp decline in the demand due and dispatches of major cement companies. In the table mentioned below the dispatch numbers for ACC cement grew marginally by 1% on YoY basis and declined by 10% to 2.07 mn tonne. The similar is the case with Ambuja cement which has witnessed sharp decline in dispatch in the month of April.