We recently conducted a cement dealer survey across various Tier I and Tier II cities to get a handle of on-ground realities in the sector. On the consumption front, government related infrastructure activities, coupled with upbeat rural and private housing demand led to a double digit growth last year. According to dealers (sample size 20), growth will continue to be buoyant in the near term as 1) semi-government projects are expected to be in full swing (as they try to deploy allocated funds before the fiscal year end in a bid to get more allocations next year) and 2) Implementation of the Sixth Pay Commission recommendations will continue to boost demand for private housing. 56% of dealers believed that the cement demand will remain healthy during the peak construction season.
Cement prices have declined in Q3 FY10, resulting in a decline in average realisation sequentially for all the players. Since Jan’ 10, acceleration in infrastructure activity, strong housing demand, logistics issues and supply constraints have led to a sharp increase in cement prices in Northern and Eastern regions. However, prices in South and West have stabilized after a swift correction witnessed during the previous quarter. Prices in Central region are witnessing divergent trends with UP seeing a hike of Rs15-20 per 50kg bag in the last 45 days, while subdued demand resulted in a modest hike in Madhya Pradesh.
About 56% of the dealers surveyed expect prices to go up from the current levels by 5-10% in the near term. However, only 22% (mostly South-based) are worried about the current supply glut and thus expect the prices to decline in the next 2-3 months.