Cement companies may raise prices amid surging demand

Rising fuel prices have been a cause of concern for cement companies over the past few months since they affect profitability. With improving cement demand, analysts expect companies to raise cement prices in the third quarter of the fiscal year to offset the higher input costs.

The latest data from dealer checks of several brokerages show that prices have indeed started to increase. According to industry estimates, the all-India average cement prices increased by 7-8% month-on-month and year-on-year to Rs 384-386 per 50 kg in October 2021. Prices increased across regions helped by higher construction activities.

Companies have been facing rising fuel costs in the recent months. International pet coke prices increased to $ 235-$ 250 per tonne in October from $ 95-$ 100 per tonne a year ago.

Also, coal prices (Australian) jumped to $160 per tonne from $55-$60 by similar comparison. Fuel expenses constitute 15-35% of the total expenses of cement companies thereby influencing their operating margins. Analysts believe that companies will be able to pass on any increase in input prices to consumers in the near term given the improving trend in demand.