Cement Prices Set To Rise As Demand Grows In H2 FY25: Report

The report indicates that the contraction in demand led to a 1.5 per cent decline in cement prices during Q2 FY25. The most significant drop occurred in the central region

With a rebound in demand and price increases, cement companies are expected to achieve 5 per cent growth for the entire FY25

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Cement demand is projected to grow by 5 per cent in FY25, with additional price hikes from companies expected in the coming months, according to a report by Centrum. Several factors have negatively impacted demand, including delayed government spending following the general election, above-average monsoon rains, and flooding in various regions across the country. Year-on-year, cement demand has contracted by 5-6 per cent, but recent capacity expansions are anticipated to drive a recovery with an expected growth of 2.7 per cent.

The report noted: “Demand across south, north and central region was weak with certain micro markets reporting more than 20 per cent YoY decline in demand. However, our recent channel check suggests that most participants expect a sharp improvement in demand in 2HFY25. We are building in 5 per cent demand growth for the sector for FY25.”

The report indicates that the contraction in demand led to a 1.5 per cent decline in cement prices during Q2 FY25. The most significant drop occurred in the central region, where prices fell by 4 per cent quarter-on-quarter. In contrast, eastern India experienced stable prices, with a slight increase in September due to a weak base.

Many cities recorded their lowest cement prices in the past 3-4 years during this quarter. However, the report notes that although prices have been on a downward trend for several months, with minor increases in August and September, a rise in prices is anticipated in the coming months.

"The slide in prices which continues for consecutive 7-8 months halted in August and some price increase was observed in the months of August and September. We expect few more rounds of price hikes in coming months driven by demand revival." the report adds.

With a rebound in demand and price increases, cement companies are expected to achieve 5 per cent growth for the entire FY25.

The report points to a significant decline in the earnings of cement firms due to reduced demand and price cuts. EBITDA is projected to fall to Rs 704 per metric ton, down Rs 159 per metric ton quarter-on-quarter (QoQ) and Rs 220 per metric ton year-on-year (YoY). However, the report also forecasts a recovery in EBITDA per metric ton.

Increased demand in South India and higher utilisation rates in North India are anticipated to drive pricing growth for cement companies in the latter part of FY25.

In conclusion, the report suggests that with the revival of demand and upcoming price hikes, cement companies are likely to see improved earnings growth in the second half of FY25.