Cement – Weak Demand May Keep Industry Pricing Under Pressure
Cement – India’s cement sector may face a slow start to FY27, with demand growth expected to remain muted in the first half of the financial year. A report by Nuvama Institutional Equities said the price increases introduced in April 2026 may not be enough to protect company margins as operating costs continue to rise and new production capacity enters the market.
Demand Conditions Remain Uneven
Cement demand was weak during April and May 2026, according to the brokerage. The period was affected by several disruptions, including unusually high temperatures, unseasonal rain, labour availability issues and constraints in raw-material supply. Broader global uncertainty also weighed on business activity and construction sentiment in some markets.
The softer demand environment has limited the ability of manufacturers to retain higher selling prices. While regional price revisions were announced in April, the gains gradually narrowed as buyers remained cautious and competition intensified.
April Price Increases Lose Momentum
Cement producers raised prices in April to manage higher expenses, particularly the increase in petroleum coke and packaging costs. However, the adjustments did not hold fully through the quarter. By the end of the period, the effective net increase was estimated at about Rs 10 to Rs 12 per bag.
The April revisions were intended to offset rising fuel-related expenses, but the report said the benefit is likely to be limited. Producers may continue to face pressure on profitability if demand does not improve at a faster pace.
Fuel Costs Continue to Affect Margins
Petroleum coke, a key fuel used by cement manufacturers, had climbed sharply because of global market developments. Nuvama said petcoke prices had reached about USD 153 per tonne, around USD 41 per tonne higher than the level seen in the third quarter of FY26.
Imported petcoke prices have since eased from a recent high of USD 168 per tonne to around USD 132 per tonne. Even after this decline, prices remain roughly USD 20 per tonne above the previous quarter’s levels, leaving cost pressures elevated for cement companies.
The brokerage expects the impact of higher input costs to become clearer toward the end of the first quarter of FY27 and continue into the early part of the second quarter.
Packaging and Freight Costs Add to Burden
Apart from fuel, crude-linked products are expected to make packaging more expensive. The report estimates that packaging costs could rise by approximately Rs 120 to Rs 150 per tonne. Freight expenses may also increase as transport-related costs remain sensitive to movements in energy prices.
These factors could restrict margin recovery even if cement companies manage to retain part of the April price increase. Companies with stronger regional demand and better cost control may be relatively better positioned, though sector-wide conditions are expected to remain challenging.
Recovery Expected in Second Half
Nuvama expects cement volume growth to remain subdued in the first half of FY27 before improving in the second half. A recovery in construction activity, infrastructure spending and seasonal demand could support sales later in the year.
However, the outlook for pricing remains cautious. Significant new capacity is expected to become operational during FY27 and FY28, increasing supply in an already competitive market. With demand still developing gradually, producers may find it difficult to implement further price increases.
The report said soft demand and additional supply could keep cement prices under pressure, making sustained profitability improvement difficult in the near term.