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MOSL: CEMENT-Trade/non-trade price gap narrows; seasonal weakness persists

CEMENT: Trade/non-trade price gap narrows; seasonal weakness persists; Some respite on cost pressure

 

• All-India cement prices declined ~1% MoM in August on account of seasonal weakness. The demand situation weakened in many regions, majorly in Kerala due to heavy rains and floods. The price differential between non-trade and trade (cement is sold under these two segments) narrowed in the north, west and central regions, as non-trade prices was hiked in early-August.
• Cost pressure subsided in August, as RIL reduced petcoke prices by INR750/t to INR9,200/t. Prices of imported coal, too, reduced by 3% MoM.
• We maintain our positive view on (a) Dalmia Bharat (DBEL) due to its strong expected earnings CAGR of 40% over FY18-20 and (b) Birla Corp due to its high profitability from Reliance assets.

 Prices in north decline 2%MoM in Aug’18

After increasing in the second half of June, cement prices corrected in July and August in the trade segment. However, in the non-trade segment, per bag prices increased by INR20 in the first week of August, thereby narrowing the gap between trade and non-trade prices. The price difference between these two segments has reduced to ~INR25/bag from ~INR40-45/bag. Demand offtake suffered due to heavy rains in NCR region. Average prices in north declined by 2% MoM in August.