Some analysts expect demand for cement to recover only in the second half of 2013-14 or from October 2013 on the back of pre-election spending by the government.
Demand is expected to remain weak until then because of the monsoon season and also because of slowdown in the economic activity.
Analysts expect monsoon to be normal, which may help resolve water scarcity in Maharashtra, Karnataka, etc. The resolution of water scarcity issue may rev up construction activity after October, analysts expect.
Therefore, till October, the realisation of cement companies may be under pressure because of subdued demand. But the falling prices of petcoke and coal, which are raw materials for cement production, may reduce cost pressures for the industry, analysts feel. He believes the recent price corrections provide an opportunity for long-term investors.
According to Teena Virmani of Kotak Securities, average realisations of cement firms during the June quarter may be low, owing to a fall in prices from April to mid-May. Of late, however, cement prices have seen a recovery.
Analysts from Religare said cement prices had corrected further in April, as demand was feeble. Despite a round of price increases in May, realisations are likely to decline year-on-year in the June quarter, the first time in 8-10 quarters.
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