Cement prices in India have dropped around 6% since June this year.
The dip in cement prices can be attributed to a slowdown in construction and the Competition Commission of India (CCI) order that penalized 11 cement companies, accusing them of cartelization.
CCI is expected to take the penalty order, which has been challenged by the companies, closer to resolution in January.
“Cement supply discipline seems to have weakened as is evident from increasing volatility in cement prices,” said Rakesh Arora, research head at Macquarie Research India. “Cement demand has been inexplicably weak and that has also weighed on pricing power.”
A senior JK Lakshmi Cement Ltd executive said the fine did not play a role in the volatility.
“The fall in prices is linked to the demand and supply scenario.
Prices fell in November and December due to a late Diwali as the workers took time to get back to work,” said Shailendra Chouksey, whole-time director, JK Lakshmi Cement.
The fine had no direct link to prices, which only started falling in November and December, Chouksey said.
However, the cement industry is expecting a rise in prices in January as the construction season sets in and a cut in interest rates may boost consumer spending.
Cement prices may rise if the Reserve Bank of India cuts its key policy rate early next year as that may spur demand for new homes and offices, analysts said.
JK Lakshmi’s Chouksey expects a Rs.15-20 per bag rise in January with “relatively better” trends in despatches already visible this month.The CCI hearing on 29 January could provide more clarity on how soon the fines will be resolved, analysts said.
If the penalties are upheld, “this can weigh on the sentiment and impact stock price (of the companies) by 10-20%,” Macquarie’s Arora said.
