The Indian cement industry demonstrated remarkable resilience in May 2025, registering a 9% year-on-year volume increase to 39.6 million metric tonnes (MT), accompanied by an 8% rise in average cement prices to Rs. 360 per 50 kg bag. This positive momentum, underscored by stable input costs—particularly lower coal and petcoke prices and steady diesel rates—has bolstered operating margins across the sector. According to a recent ICRA report, cement volumes are projected to grow 6-7% in fiscal year 2026, driven by sustained demand from housing and infrastructure development. This outlook reflects an industry navigating challenges with strategic pricing and cost management, positioning itself for continued profitability.
Cement Industry’s Strong Volume and Price Growth in Early FY2026
The cement sector’s performance in the initial months of fiscal year 2026 reveals a healthy trajectory. May 2025 alone saw volumes expand by 9% to 39.6 million MT, a significant acceleration following a 6.3% rise in volumes recorded in fiscal 2025. ICRA’s analysis highlights that this volume increase has been supported by an 8% hike in average cement prices, which rose to Rs. 360 per 50 kg bag in May, reversing the 7% price decline observed in the previous fiscal year when prices averaged Rs. 340 per bag.
April and May combined volumes rose 8% year-on-year to 78.7 million MT, illustrating robust demand momentum early in the fiscal. The price uptick reflects improved sales realization, a critical factor amid an industry historically pressured by fluctuating input costs and competitive pricing dynamics.
Margins Bolstered by Stable and Declining Input Costs
Operating margins across the industry have benefited from stable energy prices, a key input for cement manufacturing. The report notes that coal prices decreased by 19% year-on-year in June 2025, settling at USD 100 per MT, while petcoke prices also saw a marginal 2% decline to Rs. 10,880 per MT. Diesel prices, another significant operational cost, remained steady at Rs. 88 per litre compared to the previous year.
This combination of stable fuel costs and improving price realization has led to an expected operating margin expansion of 80 to 150 basis points for companies within ICRA’s sample set, with margins forecasted to reach 16.3% to 17.0% in FY2026. These figures underscore enhanced profitability prospects even amid a competitive market environment.
Growth Drivers: Housing, Infrastructure, and Capacity Utilization
Demand from housing and infrastructure projects continues to serve as the cornerstone of cement volume growth. With India’s installed cement production capacity reaching 690 million MT, according to the Cement Manufacturers’ Association (CMA), the industry is well-positioned to capitalize on ongoing urbanization and government-led infrastructure initiatives.
ICRA projects overall cement volume growth in FY2026 to fall between 6% and 7%, reaching approximately 480 to 485 million MT. This projection aligns with government policy focus on affordable housing, infrastructure expansion, and rural development, all of which underpin steady demand for cement.
Navigating Market Challenges with Strategic Pricing and Cost Efficiency
The cement industry’s rebound in prices and volumes comes at a time when geopolitical tensions could have threatened energy costs. However, the decline in coal and petcoke prices and the stability of diesel have cushioned input cost pressures. This stability allows manufacturers to pass through pricing improvements to customers without severely impacting demand.
Moreover, the rebound in prices after a year of decline indicates a market correction towards more sustainable profitability. Cement companies are demonstrating agility in adjusting prices and managing costs, which will be essential in maintaining margin improvements amid potential future volatility.
Conclusion: Cement Sector Positioned for Sustained Growth and Profitability
The Indian cement industry’s performance in early FY2026, marked by strong volume growth and a notable rebound in pricing, reflects a sector on a robust recovery path. Stable input costs have facilitated margin expansion, while demand fundamentals in housing and infrastructure remain solid.
As the industry moves forward, its ability to sustain price increases alongside efficient cost management will be crucial. With installed capacity ample and market demand resilient, the outlook for FY2026 is optimistic, signaling continued value creation for stakeholders and reinforcing the cement sector’s vital role in India’s economic infrastructure development.
Comments