Cement sales down as demand hit in near future

An analysis of data by JM Financial Institutional Securities Ltd shows that the volume of transport via railways registered a 19% month-on-month (Mother) decline in November. “Compared to the previous year, there was a decline of 12% in the transported volumes in November as the volumes witnessed headwinds in the Central, South and East regions,” the brokerage house said in a report on December 1.

Extended monsoon in some parts of the country is considered to be one of the factors reducing the demand for cement.

“Some stockists/marketing personnel are responsible for fall in demand for unseasonal rains in many parts of the country, ongoing sand crisis in eastern region and eastern Uttar Pradesh, auspicious marriage season after the outbreak of COVID-19 last year, better volumes in October 21 on expectations of price hike and sudden price hike,” analysts at Motilal Oswal Financial Services Ltd said in a recent report. They pointed out that sales volumes in November hit a historical average of 6% mommy decline for the month. Looks less than

The fourth quarter of the financial year is generally strong for the sector as construction-related activities pick up. Therefore, many analysts expect a meaningful recovery in demand after the December quarter. However, weak demand in the third quarter could mean a withdrawal of the hike in cement prices, which would continue to put pressure on operating margins. In fact, dealer channel checks by various brokerages point to a partial correction in cement prices in North, South and West India markets.

Meanwhile, the ongoing moderation in petroleum coke and coal prices may provide some respite, but their impact on margins will be visible with a lag.