Cement prices to remain strong in H2

New Delhi: The Covid-19 pandemic changed the trend in cement pricing this year. Contrary to historical trends of the lower cement prices QoQ in the third quarter of the calendar year due to softness in the demand owing to the festive season (Diwali) as well as the lower exit prices in Q2 on account of the Monsoon, cement prices have surprised by rising this year.

In the third quarter of FY21, average cement price is up 0.8 per cent QoQ so far across India as against a decline of 1.1 per cent - 0.7 per cent QoQ seen in the past 5-10 years. The same is up 7 per cent YoY to Rs 360/bag.

According to the cement report from Motilal Oswal Financial Services, cement volumes are growing over 10 per cent YoY in North, East and Central India. While demand has remained weak in the South and Maharashtra, it has recovered strongly from the 15-20 per cent YoY decline seen in 2QFY21.

Prices in South India have been particularly strong and are up 18 per cent YoY (flat QoQ). Prices in North/West/Central are up 7 per cent/6 per cent/5 per cent YoY and 3 per cent/1 per cent/2 per cent QoQ. Non-trade prices have also recovered, particularly in the North where it had fallen sharply, as institutional demand (from urban real estate, infrastructure, etc.) has been improving.

The brokerage said that Even as variable costs rise, cement spreads (price minus power and fuel and freight costs) are expected to remain strong in 2HFY21 on expected pricing strength.