CementDemand – Strong Infrastructure Push Supports Cement Sector Growth Outlook
CementDemand – India’s cement industry is expected to witness steady demand growth in the opening quarter of FY27, driven largely by continued government investment in infrastructure. However, rising input costs may limit profitability, even as companies attempt to pass on higher expenses through price increases.
Infrastructure Spending Drives Demand Momentum
Government-led capital expenditure has emerged as the primary force sustaining cement demand. Investments from central and state authorities, along with public sector enterprises, recorded a sharp rise of about 26 percent year-on-year in February 2026, reaching nearly Rs 2.3 trillion. This surge comes after a relatively slower pace earlier in the fiscal year.
Between April 2025 and February 2026, total public spending stood at approximately Rs 22 trillion, marking a 9 percent increase compared to the previous year. Notably, central government expenditure rose by 14.5 percent during this period, indicating a stronger commitment to infrastructure development.
A significant turnaround was observed in February 2026, when central spending jumped nearly 60 percent after witnessing declines in the preceding months. This recovery, along with higher budget allocations for FY27, has raised expectations that cement demand could strengthen further in the coming months.
Housing Market Weakness Raises Concerns
While infrastructure activity remains robust, the residential real estate segment presents a contrasting picture. Across the country, new housing project launches fell sharply by 28 percent during January and February 2026. This decline follows a consistent slowdown, with launch volumes dropping by 4 percent in 2024 and 7 percent in 2025.
The subdued performance of the housing sector has created an imbalance in demand drivers for cement manufacturers. Although infrastructure projects continue to support volumes, the slowdown in residential construction has limited broader demand expansion.
Seasonal Factors Affect Short-Term Demand
Cement consumption faced additional challenges toward the end of the last fiscal year. Unseasonal rainfall in several regions disrupted construction schedules, while labour shortages during the Holi festival further slowed activity in March 2026.
Industry feedback indicates that these temporary disruptions led to weaker demand during the closing weeks of FY26. However, such seasonal factors are expected to ease as construction activity resumes in the new fiscal period.
Price Hikes Attempt to Offset Cost Pressures
Manufacturers have already implemented price increases across multiple regions in early April 2026. Dealers suggest that these higher prices may hold, given the rising cost environment. Still, there are concerns about whether these hikes will be sufficient to protect profit margins.
The main pressure point for the industry is the sharp increase in fuel costs. Petcoke, a key energy input for cement production, has seen prices rise to around USD 153 per tonne. This represents an increase of roughly USD 41 per tonne since the third quarter of FY26.
In addition to fuel, companies are also facing higher expenses related to power and packaging materials. These cost increases are expected to reflect in financial results starting from the latter half of the current quarter.
Volume Growth Offers Limited Relief
Despite the challenges, production volumes have shown positive movement. In February 2026, cement volumes grew by about 9.3 percent year-on-year, reaching nearly 44.9 million tonnes. This growth highlights the underlying strength of demand supported by infrastructure projects.
However, industry observers remain cautious. The key concern is whether selling price increases can keep pace with rising production costs. If input prices continue to climb, profitability may remain under pressure despite healthy demand.
Outlook Hinges on Cost and Pricing Trends
The near-term outlook for the cement sector remains balanced. Demand is expected to stay firm due to sustained infrastructure spending, but financial performance will depend largely on cost management and pricing power.
Future trends in cement prices and fuel costs, particularly petcoke, will play a decisive role in shaping the sector’s performance. Until there is greater clarity on these factors, the industry is likely to maintain a cautious stance.