India's cement industry is projected to experience sluggish volume growth in the first half of fiscal year 2027 (H1FY27), with a recovery anticipated in the second half, according to a report by Nuvama Institutional Equities. The subdued performance is attributed to weak demand, fresh supply additions, and price pressures that are unlikely to offset profitability declines.
Weak Demand and Supply Pressures
The report highlights that demand during April-May 2026 was dampened by multiple factors, including global uncertainty, labour shortages, heatwaves, raw material constraints, and unseasonal rainfall. These conditions led to a slowdown in construction activity, affecting cement consumption. Additionally, significant capacity additions expected during FY27-28 are likely to keep prices under pressure, as supply outpaces demand.
Cement prices surged across regions in April 2026 in an attempt to mitigate rising input costs, particularly petcoke and packaging expenses. Petcoke prices increased to USD 153 per tonne, up USD 41 per tonne from Q3FY26, driven by global cues. However, the price hikes proved short-lived due to weak demand, resulting in a gradual correction. By the end of the quarter, net price increases were limited to approximately Rs 10-12 per bag.
Input Cost Challenges
Imported petcoke prices have since declined to USD 132 per tonne from a recent peak of USD 168 per tonne, but remain higher by approximately USD 20 per tonne quarter-on-quarter. The Nuvama report notes that the April 2026 price hikes are unlikely to be sufficient to offset the decline in sector profitability. The impact of higher input costs is expected to begin reflecting from late Q1FY27 and continue into early Q2FY27.
Furthermore, the rise in crude-linked prices is likely to increase packaging costs by approximately Rs 120-150 per tonne, while also exerting upward pressure on freight costs. These factors collectively weigh on the sector's margins.
Volume Growth Outlook
“We believe volume growth is likely to be sluggish in H1FY27 before recovering in H2FY27,” the report stated. The brokerage expects that soft demand, combined with large supply additions coming on-stream during FY27-28, will keep prices under pressure. The recovery in H2FY27 is anticipated as demand picks up seasonally and the impact of input cost inflation moderates.
The report underscores that the cement sector faces a challenging near-term environment, with profitability under strain. However, the expected recovery in the second half provides a glimmer of hope for industry players.
