Early Monsoon, Weak H1 Cast Shadow on Cement Demand Outlook: Ind-Ra

India’s cement sector may face headwinds in June due to the early onset of monsoon, according to a fresh report by India Ratings and Research (Ind-Ra). This comes after a 7% year-on-year growth in demand in April. Despite this uptick, the agency expects only single-digit growth in Q1 FY26, riding on a weak base from the previous year.

Overall, FY25 closed with a modest 5–6% growth in cement demand the lowest since the pandemic-hit FY21. A sharp recovery in Q4, aided by a robust 11% jump in infrastructure spending to ₹10.5 trillion, failed to fully offset the weak performance during the first half of the fiscal.

Price hikes in April and May 2025 have helped improve sales realisations early in FY26, reversing a five-quarter decline. However, FY25 saw average cement prices fall by 5–6% year-on-year, the steepest drop in two decades due to aggressive price competition and oversupply. Southern India was hit hardest, followed by the East.

Capacity utilisation for listed players stayed strong at around 90% in Q4, but full-year utilisation dipped slightly to 75% (from 77% in FY24), reflecting a sluggish first half. Meanwhile, Tier 1 cement players managed 5–6% growth in sales volumes, while Tier 2 companies saw a 2–3% decline.

Profit margins also diverged sharply. Median EBITDA per tonne dropped 20% for Tier 1 companies but plunged over 50% for smaller Tier 2 players. The weakened profitability has strained credit metrics for smaller firms, while large players retained financial headroom accelerating sector consolidation.

In FY25, about 45 million tonnes of cement assets changed hands across five major acquisition deals over half involving Southern India. “The gap between Tier 1 and Tier 2 performance is growing, and more consolidation is expected,” the report noted.

As monsoon rains begin earlier than usual, all eyes are now on how demand holds up through the season.