In Indian Cement Review, It is customary for us to write about the cover story of the issue, in this editorial page. That is what I have been trying to adhere to month after month. And this month, we are having an interesting cover story on Bagging and Packaging in the cement industry, and I was gearing up to write about that. But, along came a slew of newsbreaks or sensational news items, if one may call them, on cement prices, and I couldn’t simply resist the temptation of talking about these developments. The context or the background of the current developments were set by the upbeat temperament in the market in the previous quarter, when everyone was gung-ho about healthy price increases across all regions, and there were strong views that the price hikes would hold, providing a foundation for further improvements. Supporting such thoughts, were highly positive estimates doing the rounds of analysts’ desks, talking about a double digit growth of cement consumption in FY2020. And to top it all, there were expectations in various well-informed quarters, that the GST rate on cement will be brought down to 18 per cent, to give an impetus to an already reeling construction/real estate sector. All in all, shall we say that an air of optimism prevailed.
Contrast that with the situation today:
CW Research, in their news bulletin, said that global cement prices continued their slide in Q1, 2019. Even if we recognise that the trend of "global" cement prices do not hold much meaning, it is a bad omen nevertheless! The bad news nearer home in India, was summed up by LiveMint: "As feared,…cement price…hikes, which started in April, have failed to sustain. In June, all-India cement prices corrected by…Rs 7/bag to…Rs 361, reversing the hike taken in May". As if to rub some salt into the wound thus created, the old bogey of cartelisation has made a reappearance, adding to the discomfort of the industry. It appears that the Competition Commission of India (CCI) is examining complaints regarding hike in cement prices and cartelisation by companies. "Complaints have been received regarding hike in cement price and cartelisation by cement companies," Commerce and Industry Minister Piyush Goyal said recently in a written reply to the Rajya Sabha….
And what happened to the upbeat growth forecasts for the year 2019/20? If morning shows the day, if April and May are any indicators for the year, then let it be said that the prognosis is not good. The core sectors’ growth numbers have reported a paltry 2.3 per cent and 2.7 per cent growth in cement consumption in April and May 2019, respectively – quite a far cry from the double digits predicted! Normally, pre-election and pre-monsoon months are good for cement industry, but those traditional demand patterns have been disrupted this time. In fact, both ICRA and Care Ratings have drastically downgraded growth expectations of the sector to 5-7 per cent in the current fiscal, which is quite a comedown from the euphoria that prevailed earlier.
Such are the uncertainties of the market, and such are the vagaries of cement prices.
