Cement prices expected to rise further on rising raw material cost: Motilal Oswal

Cement prices are expected to be further raised on the back of high demand as well as rising raw material cost, said Motilal Oswal Financial Services (MOFSL).

In March 2022, cement prices rose 2-3 per cent on a month-on-month (MoM) basis across regions despite some volume push, to meet the year-end targets.

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"We believe that exit cement prices in 4QFY22 were 3 per cent higher than the average realisation for the quarter," MOFSL said.

"Our interaction with dealers suggests that non-trade cement prices in March 2022 rose by Rs 15-20 per bag in south and central, whereas the price increase was Rs 5-10 per bag in north, east, and west India."

As per the MOFSL, cement companies are planning further price hikes to mitigate the impact of rising raw material costs.

"The impact of the rise in coal and petcoke prices will reflect in energy costs from April 2022. There has been an increase in diesel prices in the last few days, which will lead to higher freight costs.

"Companies have indicated a cumulative price increase of Rs 40-50 per bag across regions in April 2022."

Besides, it said that dealers have indicated that cement demand improved in most markets in March 2022 after remaining sluggish in January-February 2022.

"We believe that pan-India cement volumes were 3-5 per cent YoY higher in March 2022 after a decline of 6 per cent YoY during January-February 2022.

"Few dealers believe that the expectations of cement price hikes in April 2022 led to a strong increase in dispatches at the end of March `22 and actual demand trends will be known by mid-April `22. However, most dealers believe that secondary sales too were strong in March 2022."

MOFSL also expects industry volumes to fall by 2 per cent YoY in 4QFY22. "For FY22, we expect volume growth for the industry to be 8.7 per cent YoY."