Cement joins auto, FMCG in going for price hikes

Cement prices in East inch up by 3 per cent in April after an increase of Rs 30-35/bag in March. A similar trend is observed in the South, where prices increased further by 1 per cent in April 2021 after the sharp price increase of Rs 45/bag in March

Under the impact of inflation and rising commodity prices, several industries have taken a price hike during Q4FY21 in order to protect their margins. It includes automobiles, FMCGs, and consumer discretionaries, and construction material sectors. Now, with price hikes in consecutive months, the cement sector has also joined the bandwagon.

A recent report from Kotak institutional suggests that all-India cement prices continued to remain in an uptrend in April 2021. The prices have increased by 1 per cent MoM at all India levels after being increased by 6 per cent MoM in March 2021.

The latest price hikes are led by East and South markets. Prices in North, West, and Central have remained broadly flat in April. Prices in East inch up by 3 per cent in April after an increase of Rs 30-35/bag in March. A similar trend is observed in the South, where prices increased further by 1 per cent in April 2021 after the sharp price increase of Rs 45/bag in March.

The prices stabilised in the Western market during April after seeing a rise of Rs 17/bag in March. Cement prices in the central market remained stable after a hike of Rs 3/bag in March. The northern market is the only territory that is showing a deteriorating trend. The prices here remained flat for the second consecutive month. It was moderated by Re 1/bag in March.

Rising RM cost pinches the consumer durable sector Similar to the cement sector, other industries have also increased their prices in wake of rising commodity prices, such as crude, copper, steel, aluminium and plastic.

It is becoming difficult for companies to absorb the rising cost of raw materials. They, in turn, are forced to pass on this rising cost to consumers to protect their margins. Under its impact, prices of consumer durable products have increased in the range of 6 to 20 per cent since the start of 2021.

The majority of the companies have also hinted to take another price hike in April, especially the cooling products. B Thiagarajan, Managing Director of Blue Star Ltd has recently hinted to take another price hike in the AC segment due to the high prices of commodities. Elevated rates of ocean freight have also increased the import cost for the industry.

Auto industry feels the burn Since the implementation of BS-VI in April last year, the cost of automobiles has been constantly rising. Most OEM manufacturers raised prices by 3-4 per cent across the vehicle categories in January 2021. In April, major industry players such as Maruti Suzuki, Renault, Hero MotoCorp, and Nissan increased vehicle prices.

As per the emerging reports, the industry executives are expecting to see the third wave of a price increase during the latter part of the year.

Inflated agri commodity impacts FMCGs

The rising cost of agri-based commodities has threatened to erase margins for FMCG companies, forcing them to take a price hike during the March quarter.

As per the March data, prices of palm oil increased by 36 per cent YoY during the March quarter, impacting the cost of Palm Fatty Acid Distillate (PFAD). PFAD is the key raw material for soap manufacturers, HUL and Godrej Consumers, prompting them to increase their prices.

Rising crude prices also impacted the cost of packaging materials, impacting all FMCG companies. Other key commodities like copra and Liquid paraffin oil (LLP) have also remained elevated, resulting in sharp price hikes in hair oil products.

(The author is founder & CIO, Teji Mandi, a SEBI Registered Investment Advisor)