India’s cement industry is expected to witness a decline in profitability during the first quarter of FY27 despite healthy demand growth, as rising input costs continue to put pressure on manufacturers’ margins. According to a recent report by India Ratings and Research (Ind-Ra), higher prices of key raw materials and logistics are likely to outweigh the benefits of moderate cement price increases implemented by producers.
The rating agency noted that costs of essential inputs, including pet coke, coal, diesel, and packing materials, have risen significantly over the past few months. Although cement companies have increased product prices in several markets, these hikes are unlikely to fully compensate for the surge in production expenses.
Khushbu Lakhotia, Director, Corporate Ratings at Ind-Ra, stated that while the industry has attempted to pass on part of the increased costs to customers, the current demand-supply dynamics make it difficult to implement the substantial price increases needed to protect profitability. She added that easing crude oil and pet coke prices in recent weeks could offer some cost relief over the next two to three quarters.
Despite the margin pressure, cement demand is expected to remain resilient. Ind-Ra projects mid-single-digit year-on-year demand growth in Q1 FY27 following approximately 8% growth recorded during FY26. Cement production also registered a 9% year-on-year increase in April 2026. However, demand momentum may have moderated during May and June due to extreme heatwaves, unseasonal rainfall in several regions, and inflationary pressures affecting construction activity.
Power and fuel continue to account for nearly 30% of total cement production costs, making the industry highly sensitive to fluctuations in global fuel prices. International pet coke prices climbed from around USD 115 per metric tonne in February 2026 to nearly USD 160 per metric tonne in April before easing to approximately USD 130 per metric tonne in June. Similarly, international thermal coal prices increased by nearly 20% during the same period.
Freight costs have also risen following the government’s diesel price hike of nearly ₹7.5 per litre in May 2026. Since transportation accounts for approximately 25–27% of cement production costs, higher diesel prices are expected to further impact operating margins.
Ind-Ra estimates that EBITDA per metric tonne could witness a double-digit decline during Q1 FY27 as companies gradually consume lower-cost fuel inventories purchased before recent geopolitical disruptions. The agency also highlighted that smaller, tier-II cement manufacturers may face greater challenges due to higher leverage, limited regional diversification, and comparatively lower operating flexibility.
The sector added nearly 50 million tonnes of production capacity during FY26, reducing overall capacity utilisation to around 70%. With fresh capacity entering the market and seasonal demand moderation during the monsoon period, utilisation levels are expected to remain slightly lower in the current quarter, further limiting pricing power for cement producers.
