[Original] India's Second Quarter Demand Is Weak and Prices Continue to Fall

   Cement prices continued to fall in April and May and showed no signs of improvement in the first two weeks of June. Now with the onset of the rainy season, dealers do not expect this situation to improve anytime soon.
   Weak prices reflect weak demand. The pan-India region has seen a weakening trend, although news reports suggest that many government projects are being bid for. Analysts believe that this may be due to the fact that few new projects have landed.

   According to a report by the securities company, the average price of cement in India during May was 293 rupees per bag (equivalent to 28.5 yuan per bag), which was lower than same period last year and the previous month.

   Some dealers said that some government projects had stopped construction because of the contractor's arrears, which affected the consumption of cement. In addition, unseasonal rains have weakened the rural economy, and low minimum guaranteed prices and low disposable incomes have also weakened rural demand.

   Another reason is that the depressed housing market has not improved since March.

   The northern region is the region with the largest month-on-month price decline, with a cumulative decline of 11% in two months. Demand in the rest of the region is also contracting, but there seems to be a rebound in demand in the southern region.

   The change of cement price in the next 10-15 days will depend on the strength of the dealer's intention to raise the price to buffer the frequent price drop during the rainy season.

   Cement production fell 2.4% in April, reflecting weak demand, according to the government's core industrial data. Therefore, cement enterprises are facing a second quarter of low sales and low capacity utilization.

   Estimates of the annual demand growth rate for 2015-2016 have been revised downward, given that a significant upward trend is unlikely to emerge in the first half of the year compared with the same period last year, and the price rise is due to the delayed rainy season, analysts said.

   The only hope is that demand will remain strong after the rainy season, and large-scale government projects are in the pipeline, especially for roads and electricity.