Coal news and updates

Prices of key commodity, cement, have recovered to pre-demonetisation levels in April 2017, according to an ICRA note. Cement prices had been negatively impacted in the West, East and South following post-demonetisation, have rebounded. In the northern region, prices have remained relatively stable, displaying relative indifference over the last six months, despite demonetisation.

 

“With the impact of demonetisation gradually subsiding, cement prices have reached the pre-demonetisation levels in April 2017 in most markets. Going forward, we expect prices to be supported by a marginal improvement in capacity utilisation. The slowdown in new capacity addition and improvement in the supply-demand scenario in FY2018 should support capacity utilisation levels and thereby cement prices. However rising costs continue to put pressure on profitability indicators for cement manufacturers in the coming quarters.” said Mr Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings.

 

As for region-wise price trends in the past six months, in the Ahmedabad market, the prices, which had declined by 17% during October 2016 – January 2017, started a rebound from February 2017 onwards and increased by around 19% to Rs. 265/bag in April 2017. Similarly, in Hyderabad, the cement prices had declined by 16% during November 2016 - March 2017. However, a steep hike in the cement prices in the month of April 2017 by around Rs. 60/bag (27% growth) on an MoM basis, pushed the prices up to Rs. 325-330/bag. This has largely been driven by a supply moderation and pricing discipline. In the East, there has been a moderate decline by 7% during November 2016 – January 2017. In this region, the demand is primarily supported by Government projects and the IHB segment, which saw an increase in cement prices by 6% in March – April 2017.

 

On all-India basis cement production reported a de-growth of 1.0% in 11M FY2017 to 255 million MT. Demonetisation impacted cement volumes which declined by 10% during November 2016 – February 2017 when compared to the corresponding previous period.

 

Looking ahead, ICRA expects cement demand to grow by around 4-5% during FY2018, mainly driven by a pick-up in the infrastructure segment - mostly housing, road and irrigation projects. Further, the increased budgetary allocation for the infrastructure sector, which includes roads, railways, metro, irrigation and housing, during FY2018 will, directly and indirectly, support cement demand. Also, higher rural credit and increased allocation for rural, agricultural and allied sectors, including the demand for rural housing, are expected to be significant contributors to the overall cement demand.

Source: Indiainfoline