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Cement Price Trends – Listless and Indifferent

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Recently, an unusual petition came up in the High Court of Meghalaya filed by the association of building contractors, complaining that though the quality of cement is subject to the Cement (Quality Control) Order, 1995, there is no similar control on the price of cement. Essentially, the petitioner sought the intervention of the court in including cement in the list of essential commodities. Later, the petition was withdrawn to air the concerns first before the government as suggested by the court. While this petition was in the Northeast, similar actions are seen from time to time in the plains as well. As we know, the bonding between the construction and cement industries, have at best, been tenuous and uncomfortable. But to the outside world, it may seem strange that even after 30 years of decontrol of cement, and years after our country’s much-touted reforms towards a market economy, there are still people in this country who do not want anything to do with market forces of supply and demand.

Cement prices have always been an exciting subject, and controversies around cement price movements do make for good copy. On top of that, if we could add a few spicy stuff like price discipline, competition commission, abuse of dominance, allegations of collusion, etc., etc., and we have a veritable potboiler in our hands. While cement prices make for good stories, they also matter a lot for the fortunes of cement companies. To illustrate the point, we could cite the findings of Quant Capital, a broking firm, when they were recently quoted as saying that cement companies have highest earnings sensitivity towards change in cement realisations. It was also said that a 5 per cent change in realisation results in nearly 20 per cent change in earnings, whereas a 5 per cent change in volume would result in nearly 10 per cent improvement in earnings. It is not a surprise that cement prices would have a bearing on profits of cement companies; The question is, when can we expect demand to pick up, and consequently when can we expect cement prices to head northward.

Judging by a lot of anticipatory investments into the cement stocks, one would be tempted to guess that cement prices will harden soon. The same broking firm foresees improvement in realisation of cement makers by around 4 per cent over fiscal years FY2017-19, aided by improved demand. Note that real and sustainable increase in cement prices cannot happen without real increase in demand, and data from recent past quarters are not promising at all. In FY17, cement consumption had actually shrunk for the first time in many years, and there are conflicting indications of demand in the current year as well. The Government numbers indicate that demand has further shrunk in June and July, and contrarily, some analysts report a robust volume increase in Apr-June quarter. It is undisputed that infrastructure growth has fallen to a 19-month low, and construction industry is still smarting under the spell of demonetisation, RERA, GST, sand shortage and a robust monsoon. We will really have to wait till October to determine if we have a recovery in the offing.

Till such time, one can only predict sideways, listless and indifferent movement of prices, with a few regional sparks here and there in some parts of the country, and with no sustained upward trend.

Sumit Banerjee Chairman, Editorial Advisory Board

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Concrete

Holcim UK drives sustainable construction

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Holcim UK has released a report titled ‘Making Sustainable Construction a Reality,’ outlining its five-fold commitment to a greener future. The company aims to focus on decarbonisation, circular economy principles, smarter building methods, community engagement, and integrating nature. Based on a survey of 2,000 people, only 41 per cent felt urban spaces in the UK are sustainably built. A significant majority (82 per cent) advocated for more green spaces, 69 per cent called for government leadership in sustainability, and 54 per cent saw businesses as key players. Additionally, 80 per cent of respondents stressed the need for greater transparency from companies regarding their environmental practices.

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Concrete

GCCA releases LCR system

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The Global Cement and Concrete Association (GCCA) has launched the Low Carbon Ratings (LCR) system for cement and concrete, a new global rating based on products’ carbon footprints. The system uses a clear AA to G scale to help customers prioritise sustainability in material selection across construction sectors worldwide. The GCCA says that the LCR system is designed to be easily recognisable, with a simple visual graphic that indicates a product’s rating and provides consistency and comparability to other products.

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Concrete

FLSmidth opens eco-friendly plant in Casablanca

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FLSmidth has inaugurated a €21 million mill liner manufacturing plant in Casablanca, covering 11,250m² with a production capacity of 6,500 tonnes annually. The LEED-certified facility significantly reduces carbon emissions by up to 56 per cent and fully recycles water used in the manufacturing process. Up to 250 jobs will be created in the Valparaíso region. Mikko Keto, CEO, highlighted the plant as a symbol of FLSmidth’s commitment to sustainable mining and community engagement in South America. Earlier in 2024, the Denmark-based company announced plans to sell its cement division to sharpen its focus on mining operations.

 

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