CEMENT
In FY22, cement production is predicted to rise 10%-12%, with utilization hovering around 65%. As a result of the government's recent announcements, which include increased infrastructure spending, the economy has been reviving, which has resulted in increased cement demand. In Q2FY22, the Indian cement businesses were unable to maintain the trend of Q1FY22 even after boosting prices. Q2FY22 was a seasonally bad quarter for Indian cement manufacturers. With the arrival of the monsoon, cement demand usually takes a back seat due to a reduction in construction activity, resulting in price correction. Cement prices in India declined 4% to INR 356 per 50 Kg pack in August 2021, MoM. Despite this periodicity, Central India was the least affected in August, with a minimum price correction of INR 3 per bag compared to the previous month. The monsoon and intense competition were two significant factors in the price decline.
Large states like Madhya Pradesh and Uttar Pradesh, on the other hand, reported a substantial increase in trade sales in August after a weak July 2021, owing to improved rural demand, higher individual home building demand from incomplete projects, and a revival of infrastructure demand with the restart of government projects. As a result, in Q2FY22, central India outpaced other regions in terms of demand growth. This was also the reason why cement prices generally remained rangebound in the market. Cement prices in south India, on the other hand, fell by 7% in August 2021. In August 2021, cement prices in the north and east fell by 3% month over month. Heavy rains in West India have lowered prices.
For most cement companies, the advantage of low-cost inventory has now faded. In this context, a further drop in cement prices at the national level would result in smaller margins for cement producers in the following months. However, if current demand holds, dealers estimate a price increase of INR 5-10 per bag in the coming quarters. It should be noted that cement prices have been rising in India in recent months to fight rising ingredient costs. The volatility in the pricing of essential input materials is an essential aspect for the business. Cement producers are still grappling with rising energy and freight prices. Petroleum coke prices have grown by 40% in FY22, reaching roughly USD 160 per tonne. In FY22, international coal prices grew by a similar amount.
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