Cement Sector Faces Margin Pressure of 150–200 Bps in FY27 as Costs Rise & Pricing Power Stays Limited

Mumbai, April 14: This anticipated decline follows a strong recovery in the previous fiscal, when margins expanded by 260–280 basis points.

Key Factors Behind Margin Pressure

Rising Energy Costs

• Energy costs account for 26–28% of total expenses for cement companies

• Power and fuel costs projected to increase by 10–12% year-on-year

• Driven by higher prices of crude oil, pet coke, and coal

Fuel Price Trends

• Brent crude: Steep 46% month-on-month increase to ~$104/barrel (March 2026); expected to remain elevated at $82–87/barrel in FY27

• International pet coke and thermal coal prices: Strengthened

• Industrial diesel prices: Surged by ~25% in March

Cost Impact

• Overall costs expected to rise by 4–6% during FY27

• Logistics and raw material procurement costs increased

Pricing Outlook

• Expected price increase: 1–3% (average price ~₹355–360 per bag)

• Pricing flexibility: Constrained due to increasing competition and ongoing capacity additions

• Realizations: Expected to rise by 2–4% (may provide some support but insufficient to fully counter input cost rise)

Demand Outlook (Positive)

• Cement demand growth projection: 6.5–7.5% in FY27

• Drivers: Continued momentum in infrastructure development; steady activity in industrial and commercial segments

Key Monitoring Factors

• Energy price trends

• Pace of infrastructure activity

• Labour availability

• Monsoon conditions