Weak demand hits cement, volumes dip in 4th quarter
Weakening demand has hit the Indian cement sector very lately. It has seen volumes fall one per cent year-on-year (y-o-y) in the fourth quarter. After the first half of FY13, companies in the sector saw pricing power diminish. Analysts believe average cement prices have remained largely flat sequentially at Rs 288/bag (up five per cent y-o-y).
Demand for cement has grown a modest five per cent for the full year. While overall slowdown in the construction and infrastructure space has been a big culprit, shortage of other construction materials like sand and bricks have also contributed to weakness in demand. Cement demand has largely been tepid other than parts of southern and western India.
Demand collapse hasn't been the only problem in Q4. The recent increase in bulk diesel rates, coal prices and rail freight have put additional pressure on costs, which the companies are unable to pass on to consumers.