After several years of consolidation and price weakness, the cement industry may be moving towards a more stable phase.
Pan-Indian, average cement prices have risen through the past three months consecutively.
In February, prices increased month-on-month (M-o-M) by Rs 3 per 50 kg bag (up 1 per cent M-o-M and 2 per cent year-on-year or Y-o-Y) to Rs 374/bag.
Prices increased in all regions except the South, where it fell marginally.
Average pan-Indian cement prices are about 2-2.5 per cent higher compared to the October-December quarter of 2024-25 (Q3FY25).
The industry is likely to attempt another price hike of Rs 10-20/bag in March 2025 or at the start of the next financial year.
There’s been some acceleration in government spending.
Profitability should improve in Q4FY25 on the back of peak seasonal demand.
Demand likely grew in mid-single digit Y-o-Y in February 2025 despite less days in the month and Maha Kumbh impacting despatches.
Given the very high base of March 2024, demand may grow in mid-single digit Y-o-Y in Q4.
Input costs are up. Petcoke prices are at 11-month high owing to supply shortages.
US petcoke CIF/ landed cost at ports increased to an 11-month high of $115/ $131 per tonnes, respectively.
Cement producers have started exploring US coal as an alternative (about 4-5 per cent cheaper than petcoke on a kcal basis).
Assuming 70 per cent petcoke usage, industry cost per tonne is likely to increase by about Rs 100 (Rs 5/bag) from Q1FY26 owing to inventory lags.
As the government accelerates spending to compensate for its underspending through H1FY25, volume will improve.
This should aid sequential recovery in earnings before interest, taxes, depreciation and ammortisation (Ebitda) per tonne in Q4FY25.
In March, dealers are optimistic saying that demand has been healthy in February.
March is a crucial month to meet year-end targets. Just one among the past three March months had shown positive M-o-M price movement.
As Kumbh logistics pressure eases, prices may correct in the central region where there were supply constraints.
Prices in South India also continue to hover at January levels.
Channel checks suggest that price hikes in the range of Rs 10-30/bag happened at various pockets in early February.
However, part of these hikes was rolled back and only Rs 10-15/bag was absorbed.
Sustained competitive intensity and year-end volume targets are likely to hamper hikes in March.
Demand has been facing challenges due to labour shortages, transportation bottlenecks, and muted government spending.
However, early signs of recovery were visible in December 2024.
And, with an expected pickup in government capex in Q4FY25, demand is likely to gain momentum during the coming months.
On a sequential basis, demand has strengthened significantly; however, it remains lower compared to Q4FY24, with a 7-8 per cent Y-o-Y volume growth expected in Q4FY25.
Volume for FY25 is expected to grow by 4-5 per cent and gain by 6 -7 per cent in FY26.
A gradual rise in energy cost may be a concern, hitting realisation.
Cement players will need to either hike prices further or reduce cost structures.
Coal prices (imported) have been increasing since December 2024 to $139/tonne in February 2025 (up 12 per cent Y-o-Y and 3 per cent M-o-M).
Also, average imported pet-coke prices increased to $131/tonne in February 2025 (up 5 per cent Y-o-Y and up 1 per cent M-o-M).
Domestic pet-coke prices (Chennai Petro Chemical) saw a sharp increase of Rs 630/tonne in February 2025 (up 5 per cent M-o-M and 7 per cent higher than Q3FY25 average prices).
Domestic e-auction coal prices (Coal India) rose by about 8 per cent quarter-on-quarter (Q-o-Q) in Q3FY25 and may rise further.
Hence, players without sufficient captive coal sources may accumulate high-cost energy inventory.
This raises concerns on profitability. Players with higher reliance on green energy are better placed to maintain margins.
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