Cement Channel Check - Segmental price differential widening; Edelweiss PDF link

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Our channel checks indicate widening gap between trade and non-trade prices in North, East and West regions. We believe these are initial signs of price correction in the trade category as we approach the monsoon season. Prices have corrected by ~INR5-20/bag in the trade category and by ~ INR5-35/bag in the non-trade category across regions over the past one month. Cement demand was below expectation due to ban on sand mining in a few states and labour shortage owing to the harvesting season.

April cement despatches up ~7.3% YoY

Industry despatches in April rose ~7.3% YoY and dipped 13.7% MoM. While the top five players (ACC, Ambuja, UltraTech, JPA and Shree Cement) reported a growth of 6.2% YoY and a decline of 16.3% MoM, the rest of the industry seems to have grown by 8.6% YoY and declined by 10.8% MoM. Historically, there have been very few instances where rest of the industry growth has surpassed top five players’ surge and they were coupled with price weakness (refer chart 2).

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: Labour shortage singes demand

Cement prices in North have declined by ~INR10-20/bag in the trade segment and by ~INR10-35/bag in the non-trade segment over the month. Shortage of labour and sand has led to low demand in Rajasthan. Dealers expect prices to decline further by ~INR 5-7/bag across the region.

East:  Low demand

Prices in the region have corrected by ~INR5-10/bag in the trade segment and by ~INR5-15/bag in the non-trade segment. Companies have resumed sales in non-trade segment in Raipur. Price decline of ~INR5-10/bag is expected in Bhubaneswar, Durg and Patna while it may remain flat in Kolkata and Raipur in the coming weeks.

South:  Sand mining ban dents prices

Sudden drop in demand led by ban on sand mining in Andhra Pradesh (w.e.f. April 1, 2012) has resulted in a price drop of ~INR5-30/bag in the trade segment and INR5-15/bag in the non trade segment. Prices are under pressure in Bengaluru due to increased supply. Dealers expect prices to decline ~INR 5-15/bag in the coming weeks.

Cement Channel Check – Segmental price differential widening; monthly update

Regards,