Crisil: Cement prices may decrease 1-3% despite strong demand

Crisil report suggests that the cement prices may witness a decline of 1-3% in the current fiscal year, despite the presence of a strong demand. The report also mentioned that the prices of cement had been steadily increasing over the past four years, with a compound annual growth rate (CAGR) of 4%. This led to a record high price of Rs 391 per 50 kg bag in the previous fiscal year. The Crisil report emphasised the growing competitiveness within the industry. Since the beginning of 2023, there has been a moderation in cement prices, which can be attributed to the gradual decrease in energy costs and the efforts of manufacturers to capture a larger market share in the seasonally strong fourth quarter. Even though carrying high-cost inventory, the average prices of cement decreased by 1 percent to Rs 388 per bag during the fourth quarter of the previous fiscal year. However, when compared to the previous year, the prices remained elevated. As per the report, there were no pre-monsoon price hikes in April and May of the current fiscal year, which is a departure from previous years. This occurred despite a consistent demand. The top five players in the market accounted for a 55 percent volume share in the previous fiscal year, as opposed to 49 percent before the Covid-19 pandemic. The report cited Hetal Gandhi, the director of research at Crisil Market Intelligence and Analytics, who mentioned that Crisil MI&A Research expects a strong growth in cement demand this fiscal year, ranging from 8-10 percent year-on-year. Gandhi also predicted a decline of approximately 2 percent year-on-year in cement prices, reaching Rs 382-385 per bag. This decline is expected to be influenced by a relatively moderate growth in the trade segment. Furthermore, the report highlighted a favourable situation regarding input costs. The decrease in Australian coal prices, along with the easing of international and domestic pet coke prices, is anticipated to lead to a decrease in cement prices. According to the report, the expected corrections in diesel and crude oil prices are likely to alleviate the cement industry's burden of high costs and declining profitability. Also read: Shree Cement expanding manufacturing capacityKamdhenu Paints aims four-fold revenue growth, targets Rs 10 bn by 2028