Cement prices to rise 6% y-o-y despite fall in demand: ICICI Securities

Average cement prices are expected to rise by 6 per cent y-o-y and 7 per cent on q-o-q basis across the country despite volume decline in the southern and central regions, a report said on Wednesday.

However, the eastern region is likely to see a strong growth in demand for the key building material, it said.

"Average pan-India cement prices are likely to be up 6 per cent YoY and 7 per cent QoQ, led by the western region where prices are likely to be up 10 per cent YoY and 15 per cent QoQ. Prices across other regions are likely to be up 3-7 per cent both YoY and QoQ," said the report by ICICI Securities.

The average cement prices stood at Rs 283 per 50 kg bag in the north Indian market in Q4FY17. Among other markets, cement prices per bag were Rs 292 in east, Rs 268 in west, Rs 298 in central, Rs 322 in the southern market in Q4 of the last fiscal, the report said.

"We estimate industry volumes to be up 1 per cent YoY as strong demand growth in the eastern region is expected to be offset by volume declines in the southern and central regions," the brokerage said.

The report pointed out that the raw material cost is also likely to go up this year. Total costs per tonne are expected to be up by 7 per cent YoY led by price increase in pet coke, diesel, slag and packing material, among others. With the onset of monsoon, volume flow and prices are likely to remain muted, it said.

The cement volumes in the southern and central regions are likely to be down YoY, owing to weak off-take in Tamil Nadu due to political matters and Uttar Pradesh, where sand mining issue continue to impact off-take, the report said.

Volumes in the eastern region are likely to grow sharply by 20 per cent YoY, led by strong demand in Bihar, Jharkhand and Odisha and backed by increased government spending on road, housing and hospitals, ICICI Securities said.