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MOSL: CEMENT: Temporary weakness in demand; prices should improve further in 4QFY22

CEMENT: Temporary weakness in demand; prices should improve further in 4QFY22

 

Demand under pressure in Nov'21, but expect an improvement going forward

• Cement demand has not yet picked up after the festive season, and sales volume in Nov'21 seems to be 18-20% lower than Oct'21 levels and against its historical average of a 6% MoM decline in November.
• Few stockists/marketing personnel attribute the decline in demand to unseasonal rainfall in many parts of the country, continued sand crisis in the East region and Eastern Uttar Pradesh, auspicious marriage season after the COVID-19 outbreak last year, better volumes in Oct'21 on expectations of price hikes, and sudden price hikes.
• With the onset of the busy construction period (December-March), we expect demand to recover going forward. Historically, Cement demand in December has been 12% higher (average of FY05-21) than November.
• Based on current demand trends, we expect industry volumes to decline by 4-7% YoY in 3QFY22. Core industries data for FY21 did not reflect the true picture of industry demand trends (our analysed companies, which represents over 60% of industry's capacities, reported a volume growth of 2% YoY in FY21, whereas the core industries data reflected an industry volume decline of 12% YoY).