The Indian cement sector is navigating a challenging pricing environment, with the southern region emerging as the primary pressure point in the third quarter of the 2025-26 financial year. While the industry anticipates a recovery in volume growth and profitability by FY26, the immediate picture, particularly in the South, is one of significant price correction and competitive intensity.
Southern Region Drags Down National Average
According to data from Elara Securities (India), the all-India average cement price declined by 1.6% quarter-on-quarter in Q3FY26, settling at ₹336 for a standard 50 kg bag. The most pronounced weakness was concentrated in the southern markets, which recorded a steep sequential drop of 3.9%, pulling the regional average down to ₹304 per bag. This decline marks a weak end to the calendar year 2025 for the region, which had initially seen aggressive price hikes of ₹20-45 per bag in April only to witness a consistent downward trend thereafter.
The correction was not uniform across all southern states. In December, prices in Tamil Nadu and Kerala fell by approximately ₹5 per bag, while markets in Karnataka, Andhra Pradesh, and Telangana remained flat on a month-on-month basis. The core issue plaguing the South is a fundamental mismatch between supply and demand. The region is grappling with an oversupply situation coupled with relatively tepid demand growth, a scenario that has been worsened by heightened competition among manufacturers.
Market Share Battles Delay Pricing Recovery
The competitive landscape has been further intensified by recent consolidation moves. The acquisitions of Penna Cement and Orient Cement by the Adani group, and The India Cements Ltd by UltraTech Cement Ltd, are strategic plays to bolster regional and national presence. However, this chase for market share is currently acting as a headwind to any meaningful pricing revival. Other key players with significant exposure to the southern market include The Ramco Cements India Ltd and Dalmia Bharat Ltd.
Analysts do not foresee a quick fix to the demand-supply imbalance. A report by PL Capital dated 31 December highlights that the South is expected to see the second-highest capacity addition in the country over the next four years, totalling a substantial 46 million tonnes per annum. While demand is anticipated to receive a boost from infrastructure projects in states like Andhra Pradesh and Tamil Nadu, the recovery in capacity utilisation is projected to be slow.
PL Capital notes that the implementation of announced infrastructure projects has been delayed over the past six months. Consequently, the brokerage expects the region's utilisation level to only gradually improve over the next three years, reaching 62% from 61% in FY25.
Near-Term Outlook and Challenges
In the immediate term, some respite is being explored. Channel checks by brokerages indicate that dealers in the South may attempt to implement price hikes in January 2026. However, the sustainability of any such increase is under question. The upcoming festivals of Makar Sankranti and Pongal are likely to temporarily slow construction activity and lead to labour shortages, potentially undermining efforts to hold higher prices.
The broader sectoral context offers a mixed view. The cement industry is projected to register a muted 5% year-on-year volume growth in FY25. A more robust recovery is forecast for FY26, with volume growth expected to be between 6-8% alongside better profitability. For now, all eyes remain on the southern market, where the interplay of aggressive competition, new capacities, and the pace of demand recovery will dictate the pricing trajectory and, by extension, the profitability of cement companies with a presence in the region.
