Coal news and updates

Easing power and fuel costs saved the day for cement companies in the quarter gone by.

 

The current quarter is a seasonally weak one with cement prices declining in most parts of India on lack of demand.

 

But this phase is a regular phenomenon for cement firms and the stock market, too, is aware of that.

 

Typically, to deal with the lull, many cement companies plan a maintenance shutdown during this time.

 

The prices in north, east, west and central India have fallen on a month-on-month (MoM) basis.

 

Average cement prices in the north fell nearly 2-3% MoM; in Delhi, the fall was to the extent of Rs.20-25 per bag.

 

In the eastern region, prices dipped by around Rs.5-10 per bag, said a recent Edelweiss Securities Ltd report. The only exception was southern India. Prices in the states of Andhra Pradesh and Telangana have improved recently by around Rs.20-25 per bag over the previous month, an analyst with Reliance Securities said.

 

This year, though, cement prices haven’t dropped as sharply as they had during the same period last year.

 

“For instance, in central India, prices corrected from Rs.270-275 per bag in Q1FY16 to Rs.230-238/a bag during the lean season last year; this year, it has corrected from Rs.300-305 per bag to Rs.270-280 per bag, mainly because of drought conditions prevailing last year,” an analyst said on condition of anonymity.

 

Yes, the gap in price correction has narrowed, but the cause for concern is the offtake in terms of volume hasn’t been very significant despite the government’s efforts to push infrastructure and allied activities. On the ground, the impact of the measures taken by the government is yet to be felt.

 

Meanwhile, a revival in cement demand and an improvement in prices is expected from the third quarter, especially during Diwali, and the second half of the fiscal is likely to be better.

 

As of now, some analysts are not reading too much into the falling prices; but if volume does not pick up as expected, then prices could weaken further, they caution.

 

Cement stocks have been rewarded by the stock market for their performance in the first quarter of FY17. Many of them have outperformed the benchmark index on a year-to-date and year-on-year basis. Seasonal weakness could be a dampener, leading to some correction in cement stocks.

SOurce: Livemint.com