Cement prices may inflation by 4%, which is good news for the sector

According to CLSA, the Indian cement sector may see a price increase of 4% in the second half of FY25 and this will be good news for companies that have been affected by low prices across India for the last several quarters. However, the sustainability of these price increases remains a key monitorable factor, according to the brokerage.

Cement prices increased by Rs 10-30 per bag in early December. The increase was the highest in the eastern and central regions of India at Rs 20-30 per bag, while the rest of the regions saw an increase of Rs 10.
This means that cement prices across India have increased by 3.5% quarter-on-quarter so far in the third quarter. However, prices are still down 5% year-on-year.

According to CLSA, cement demand remained weak throughout October, but it gradually improved in November after the festive season. This leads the brokerage to expect a recovery in cement demand in the second half of the year as well as in FY26.

Cement sector outlook

The main question now is whether this price hike will sustain. A dealer survey by Nomura in early December showed that dealers do not expect this price hike to sustain.

Goldman Sachs believes the next fiscal year will be better than FY25. “We expect demand growth of ~7% yoy in H2FY25/FY26, compared to 2% yoy in H1FY25,” the brokerage said in a report.

Next year will see a recovery in rural and urban real estate demand. The three largest cement companies (UltraTech, Ambuja and Shree) have targeted adding 13 million tonnes/41 million tonnes of cement capacity in H2FY25/FY26 alone.

“We expect the industry to add around 45-50 million tonnes of capacity in FY2026, well above the 30 million tonnes of incremental demand expected in FY26,” Goldsman Sachs said.