CementSector – Demand Recovery and Budget Push Lift Industry Outlook

CementSector –  The cement industry is showing signs of renewed momentum, backed by steady demand, firmer prices and a larger capital expenditure allocation in the Union Budget for FY27, according to a recent assessment by Nuvama.

Demand and Prices Show Early Recovery

The report notes that January 2025 marked a noticeable improvement in both cement demand and pricing trends. After several months of volatility, the market witnessed better traction, suggesting that consumption patterns are gradually stabilizing.

This recovery in pricing began toward the end of 2025. Cement rates, which had softened during October and November, started to climb from December onward. Analysts believe this upward trend is likely to continue through the fourth quarter of FY26, offering manufacturers improved margins after a challenging patch.

The combination of improving realizations and better absorption levels across regions has strengthened confidence in the sector’s near-term performance.

Mixed Signals from Government Capital Spending

While the demand outlook remains constructive, government capital expenditure presented a mixed picture. In January 2026, capital spending by the central government declined sharply by about 25 percent compared with the same period a year earlier. Capital outlays by central public sector enterprises (CPSEs) fell even more steeply, dropping around 40 percent year-on-year.

However, this slowdown at the central level was partly offset by stronger spending by state governments. In December 2025, state capital expenditure expanded by roughly 15 percent compared with the previous year, helping sustain infrastructure activity in several regions.

Looking at the broader April–December 2025 period, both central and state government capital expenditure recorded growth of about 15 percent year-on-year. In contrast, CPSE spending during this period slipped marginally by around 2 percent.

Despite the uneven monthly data, the cumulative trend for FY26 so far indicates that public spending has largely supported construction activity, which remains a key driver for cement consumption.

Real Estate Activity Remains Subdued

The real estate segment, another important contributor to cement demand, continues to face headwinds. Project launches in calendar year 2025 fell by approximately 9 percent compared to the previous year. This followed a 7 percent decline in 2024, reflecting a cautious approach among developers amid changing market conditions.

Although weaker housing launches typically dampen cement offtake, the report suggests that infrastructure and public works spending have compensated for this softness. As a result, the broader demand environment for cement has not deteriorated in line with real estate trends.

Budget Allocation Raises FY27 Expectations

A key factor shaping the sector’s outlook is the higher capital expenditure allocation announced in the FY27 budget. The increased outlay has raised expectations that infrastructure activity will accelerate further in the next financial year.

According to the analysis, the capital expenditure trajectory during the year-to-date period of FY26 has already provided meaningful support to cement volumes. With the government signaling a continued focus on infrastructure development, industry participants anticipate stronger demand conditions in FY27 compared with FY26.

The report projects that industry volumes are likely to expand in the mid-single-digit range year-on-year in FY26. This growth is expected to be supported by improving pricing trends and steady absorption across major markets.

Positive Momentum Heading into Q4FY26

Looking ahead, analysts expect demand to remain healthy in the fourth quarter of FY26. The combination of better price realization, gradual recovery in consumption, and ongoing public infrastructure projects is seen as underpinning sector performance.

While certain segments such as real estate are yet to regain full strength, the broader construction ecosystem appears stable. With supportive fiscal policy and improving market dynamics, the cement industry is positioned for steady growth over the coming quarters.