Cement prices have increased by Rs 30-40 per bag in the West, North and Central markets over the past few months despite a sluggish volume growth, a report said.
"All-India cement prices improved by Rs 3 per bag m-o-m (month-on-month) to Rs 332/bag (of Rs 50 kg) in October 2016, led by price increase in Western region. Prices have increased by Rs 30-40/bag in West, North and Central markets over the past few months. However, volume growth remained sluggish," said a report by Kotak Institutional Equities.
On the demand side, heavy monsoon rains played a spoilsport and industry volumes increased by only 2.3 per cent Y-o-Y in July-September 2016 after 6 per cent growth in Q1 FY17.
Maharashtra, a major market, witnessed a sharp rise in cement prices, Rs 24 per bag, in October.
Prices also remained firm in Andhra Pradesh/Telangana region after significant increase of Rs 55/bag in September 2016, raising the prices in the southern region to Rs 369/bag.
Prices in the North, Central regions saw marginal changes from the previous month, while rate movement in the East remained flat as it was for over a year now.
"If October prices sustain for the rest of the quarter, we expect players in the West (+ Rs24/bag), South (+ Rs24/bag: especially for AP/Telangana region) to see an improvement, while North (- Rs10/bag) and Central (- Rs5/bag) will see marginal declines," the report said.
"We expect headwinds from over 50 per cent increase in pet-coke prices. Poor volumes and rising costs may offset the already factored increase in cement prices for pan-India players.
Pet-coke prices have risen to USD 84 per tonne in October 2016 from USD 53/tonne in Q1 FY17. Given the large usage of pet-coke across companies, we expect substantial increase in fuel cost for most cement names, it added.
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