Cement prices witnessed a Rs 15-17 per bag increase from Jan to Feb at all India level and the peak price was Rs 390 per bag. In march the price fell marginally (Rs 3) and per bag sold at Rs 387, on the back of volume push by companies to meet year end targets. In this month cement companies hiked the prices by Rs 20-50 per bag across regions to reduce cost increases.
The higher cost of raw material prices will continue to impact cement manufacturers, as they have only taken modest price hikes so far. “In fiscal 2023 the prices are expected to increase Rs 12-15 per bag. Sharp hikes are expected in first quarter, prices are expected to moderate with the onset of the monsoon”, said Hetal Gandhi, research director at Crisil.
Globally the coal prices shot up by 35% in the fourth quarter and pushed the per tonne cost of clinker production by 2-2.5 times. The prices of global pet coke raised over 50% in march.
Cement companies use pet coke and imported coal as fuel in kilns for clinker production and thermal coal for power. Fuel, power and freight costs account for about 55-60% of the industry’s total operating costs.
“Cement manufacturers usually hold 2-3 months of raw materials and the impact of recent price hikes would reflect in first quarter of FY23. Overall we expected in FY23, costs will not be fully offset by the price hike resulting in 100-200 basis points on year contraction in Ebitda margins”, Gandhi added.