Cement demand outlook remains strong as ICRA flags cost pressures ahead

India’s cement sector continues to demonstrate resilience, supported by sustained demand from housing and infrastructure, even as cost pressures begin to build. According to a recent ICRA report, cement production rose by 4 per cent year-on-year in March 2026, reaching 48.4 million tonnes despite a high base.

For the full financial year 2025–26, production volumes registered a robust 8.6 per cent growth compared to the previous year. This steady expansion highlights the sector’s strong underlying demand fundamentals, driven by ongoing real estate activity and infrastructure development across the country, including key markets such as Chennai and other parts of Tamil Nadu.

Looking ahead, ICRA expects cement volumes to grow by 7 to 8 per cent in FY27, supported by continued momentum in housing construction and government-led infrastructure projects. However, the sector is likely to face margin pressures due to rising input costs.

Fuel prices remain a key concern. While coal prices declined by 17 per cent year-on-year to USD 102 per tonne in April 2026, petcoke prices have surged significantly. Petcoke rose 19 per cent month-on-month and 22 per cent year-on-year to around Rs 15,800 per tonne, increasing cost burdens for manufacturers. Diesel prices have remained stable, offering some relief on logistics expenses.

ICRA also cautioned that fuel costs are expected to trend higher in FY27, influenced by global factors including geopolitical tensions in West Asia. This could impact operating margins, which are projected to moderate by 200 to 400 basis points.

Despite these challenges, the overall outlook for the cement sector remains stable. Demand visibility continues to be strong, and companies are expected to maintain comfortable debt protection metrics even as they navigate a more volatile cost environment.