Cement demand hit by lockdown, to remain muted in short-term: Report
The lockdown to prevent spread of coronavirus has brought almost all economic activities to a halt
Demand for cement is expected to be muted in the near-term owing to exodus of labourers from construction sites following the nationwide lockdown, Reliance Securities said. According to the broking firm, cement demand came to a standstill in the latter part of March due to the lockdown announced across the country in the wake of COVID-19 pandemic.
"Cement demand, which started recovering from the beginning of 2020, suddenly came to standstill towards the second half of March. Most dealers cited that the companies started pushing volume from the beginning of month, which are still lying at dealers' level," the firm said in its report.
Due to the exodus of labourers from construction sites during the lockdown period, immediate revival of demand is not in sight, it said.
The lockdown to prevent spread of coronavirus has brought almost all economic activities to a halt, with daily wagers, especially migrating workers, employed in construction and other informal sectors forced to return to their respective villages, mostly on foot.
"Whilst the dealers expect demand momentum to witness moderate pick-up after lockdown gets lifted, they envisage a meaningful recovery in demand only after monsoon, as return of the labourers to construction site is certainly not in sight immediately," it added.
The broking firm further opined that construction works in non-metro segment can be revived faster due to involvement of more of local labourers.
According to Reliance Securities, the working capital cycle of cement manufacturers may be stretched a bit in January-March quarter due to non-payment from dealers for unsold inventories.
The report noted that all-India cement price softened marginally by 0.5% month-on-month to Rs 310-315 per bag in March, mainly led by moderate price contraction in northern, southern and eastern regions.
On a quarterly and yearly basis, prices improved by 2.8% and 2.1%, respectively, in the fourth quarter of financial year 2019-20.