Prices rise by Rs 25 per bag in February as compared to the previous month in cement

Cement prices increased by Rs 24-25 per bag of 50 kg in February as compared to the previous month amid falling cost and rising demand growth, according to a report. The hike in the cement prices came after a "protracted stall" following the rollout of the goods and services tax in July 2017, said CRISIL Research in its report.

The increase would help the cement industry increase profitability and margins, it added. "The recent steep hikes in cement prices will boost the operating profitability of manufacturers even as costs are descending and demand growth ascending," the report said.

The southern region had the steepest hike, where Hyderabad witnessed a rise of Rs 77 per bag, followed by Rs 62 per bag in Chennai and Rs 52 per bag in Bengaluru. While other regions had a moderate increase, with Rs 26 in the west followed by Rs 12 in the east, Rs 7 in the central region, and Rs 4 per bag in the north, the report said.

"This upends the downtrend in cement prices seen since the rollout of the GST," it said. Even in the current financial year, cement prices saw a decline of 2.5 per cent between April 2018 and January 2019 despite healthy demand growth of 12.5-13 per cent in the nine months, it added.

CRISIL Research Senior Director Prasad Koparkar: "The price hikes, coupled with falling costs and rising demand growth, will enable 200-250 bps (basis points) on-year improvement in margins in the current quarter." Sustainability of these prices beyond the current quarter appears uncertain as demand momentum is seen coming off in the first half of the next fiscal, given the impending elections, he added.

Meanwhile, the cost of power and fuel and freight have been trending down. "Petcoke prices have softened to USD 91 per tonne in the current quarter compared with USD 110 per tonne in the corresponding quarter a year ago," it added.

India is the second-largest producer of cement in the world after China, with an installed capacity of 472 million tonnes per annum.

(With inputs from agencies.)