Indian demand picks up as industry awaits improved prices

Cement demand in India is improving, but prices have not recovered as yet, according to Motilal Oswal Financial Services (MOFS).

Demand has been robust in February, led by the continued healthy demand in the north, east and central India as well as the recovery seen in the west of the country. However, the southern region has seen weak demand, although there has been a strong QoQ uptick in Andhra Pradesh and Telangana.

"Our channel checks indicate the seasonal uptick in demand is playing out, with volumes bouncing back strongly from the weakness seen in the first few weeks of January," the financial research house said.

"Demand in east has been particularly strong, supported by pre-election spending in West Bengal and strong industrial or infra demand in Odisha,” added MOFS. Meanwhile in the west the recovery in urban real estate and construction have supported demand in the west of India with Maharashtra volumes reported on the rise for the first time since the outbreak of the COVID-19 pandemic.
"Demand in North and Central has also improved in February – supported by a receding winter season, which has improved the pace of construction work,“, according to MOFS.

Prices have improved 1-2 per cent on a MoM basis in north and west India, while the average pan-India price decreased by two per cent QoQ in the 4QFY20-21.

MOFS also said that cost inflation was a near-term concern as petcoke, coal and diesel prices have seen hikes of 71, four and 26 per cent YoY, respectively. This is expected to lead to a margin decline sequentially although YoY, it should still be higher.  “We expect our coverage EBITDA to grow by >20 per cent YoY in the 4QFY20-21, driven by 18 per cent YoY growth in volumes.”