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Cement prices across regions have surged by ~INR 7 to 63 per bag post the rail freight and excise duty hike announced last month. Currently, however there is a sluggishness that has set in due to the year-end volume push in March and below expected demand so far in April. Companies have announced further price hikes this month, which we believe are unlikely to be absorbed and have been effected to preclude price correction. We believe prices are close to peak levels for this season as a few markets have exhibited demand resistance.
March despatches expected to be up ~8% YoY
Taking a cue from despatches of major players (who collectively reported an increase of 10.4% YoY and 9.9% MoM), we expect industry despatches in March to be up ~8% YoY. As a result, we estimate FY12 demand to inch up to 6.7% YoY.
· Region-wise summary
We surveyed 29 cities across India to get a region-wise demand and price trend in both trade and non-trade categories. Key highlights are as follows:
North: Demand yet to pick up significantly
Current cement prices in North are up ~INR7-44/bag compared to prices as on March 7, 2012, post railway freight and excise duty hikes. Demand is low in Rajasthan as the state government has imposed a ban on sand mining. Demand in NCR has improved marginally. Prices are expected to increase ~INR 5-15/bag in cities like Amritsar, Jaipur and Jalandhar while dealers expect prices to remain flat across Delhi, Gurgaon, Jodhpur, Ludhiana and Sri Ganganagar.
East: Sluggish demand
Prices in the region have increased ~INR20-42/bag over the month post hikes in railway freight and excise duty. Companies have stopped sales in non-trade segment in Raipur. Price hike of ~INR5-10/bag has been announced in Bhubaneswar, Kolkata and Raipur which we believe is difficult to be absorbed due to sluggish demand.
South: Prices to remain flat
Post the hike in railway freight and increase in excise duty announced in Budget, cement prices have increased ~INR10-40/bag in Bengaluru, Cochin and Chennai while prices in Hyderabad have broadly remained flat. Dealers expect prices to remain flat in the coming weeks across all cities, except Hyderabad, wherein decline of ~INR5/bag is expected on back of low demand.
West: Prices on an uptick except Gujarat
Prices have seen an uptick in all cities across the region except Ahmedabad and Surat (Gujarat). Prices in Ahmedabad and Surat have largely remained flat in the trade segment while in the non-trade segment they have declined ~INR10-20/bag. Dealers expect flat prices across Mumbai, Nasik, Pune and Surat while prices in Nagpur are expected to increase ~INR10/bag.
Central India: Prices on the rise
Prices have seen a hike of INR25-63/bag across the region over the month post increase in railway freight and excise duty hike announcement. Price hikes are expected to increase ~INR10-20/bag in the coming weeks which we think are unlikely to get absorbed. Demand has improved in Indore.
Regards,
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