Cement freight data shows volume growth

12 Jan 2021 CW Staff

According to data shared by the Ministry of Railways, cement volumes transported by the railways grew 35% and 26% on a sequential and annual basis in the December quarter to 35.5 mt.

An analysis by JM Financial Institutional Securities Ltd showed that the correlation between the two indicates a strong cement volume growth in Q3.

Analysts said that cement demand has picked up from the second half of December on seasonal improvement in construction activity.

Despite volume growth, cement prices remained subdued, as projected through channel checks by various brokerages. As per a Reliance Securities Ltd report, the price correlation can be credited to volume push by the cement companies across the regions (barring the Southern region). The non-trade prices saw a steeper shrink, which widened the price differential between trade and non-trade segments in select portions.

Meanwhile, freight costs on volumes transported through railways on a per tonne basis increased 6% year-over-year and 3% quarter-over-quarter, as projected by the JM Financial analysis.

For cement companies, freight and forwarding costs account for 21-25% of total operating costs. The cost of key manufacturing inputs petroleum coke, among others, are witnessing a surge as well. In this backdrop, meaningful price hikes are a must to protect the operating margin.

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