Cement makers struggle to take price hikes in Q4

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Cement makers are most likely to end the current quarter with no meaningful price hikes. This would be the second consecutive quarter where attempts to raise prices failed, according to industry officials and analysts as cement makers focus on retaining market share.

The all-India average cement price in the March-2023 quarter appears to be flat to marginally negative sequentially, wrote Motilal Oswal analysts in a March 22 note on the cement sector. They suggest attempts to hike prices in different markets have been met with rollbacks, cuts and other financial year-end sale incentives.

Healthy demand, stiff competition 

The absence of price hikes is despite cement demand growing at a healthy pace. According to rating agency Crisil, cement demand is set for its third straight year of growth with a 7-9 percent jump to 425 million tonnes (MT) in the next financial year.

Crisil said cement demand grew 11 percent on-year in the first 10 months of this financial year, led by rapid execution in infrastructure projects and strong traction in the real estate and rural affordable housing segments.

Industry executives said increased competition played spoilsport in holding up price hikes. “Due to heightened competitive measures, cement players are unable to increase prices,” analysts with ICICI Securities wrote in their March 21 note following an interaction with Shree Cement.

Nirmal Bang’s channel checks for the cement sector earlier this month showed a similar trend. “There has not been any material increase in prices, despite several price hike attempts,” the report released on March 10 said.

According to the report, prices in the western and northern regions remained unchanged between February and March, and for certain markets in the southern region, prices fell by Rs 5 to Rs 10 a bag. The eastern and central regions were the only exception with a marginal price hike of Rs 5-7 a bag.

Price cut on the cards?

Analysts also added that more price cuts may be on the cards to meet targets. “Our interaction with channel partners suggest that cement companies may announce discounts and schemes to meet their year-end volume targets,” analysts with Motilal Oswal wrote in their note.

This would be the second quarter where Indian cement makers have failed to take meaningful hikes. For the first nine months of FY23, according to a CareEdge report released in January, wholesale cement prices rose 7 percent from a year earlier on average in the first half of FY23, while prices remained flat in the third quarter.

In an earlier report, Moneycontrol wrote that efforts to increase prices in the December quarter were met with limited success as cement makers focused on market share.