Cement Prices Show Early Revival Signs in South India, Says Nomura

The cement industry in South India is beginning to show early signs of a pricing recovery after a prolonged phase of pressure on margins. According to Nomura, recent price hikes indicate improving discipline among major players, particularly in the southern markets where realizations had corrected sharply following earlier GST adjustments.

In February, manufacturers announced price increases of Rs 15 to Rs 20 per bag. While not the entire hike sustained, nearly Rs 10 per bag has held firm, which analysts view as a constructive development. The fourth quarter is typically volume driven, making sustained price hikes difficult. However, the current trend suggests a gradual shift in industry strategy from aggressive volume push to value focused growth.

Demand conditions remain steady and largely in line with expectations. There is no extraordinary surge in consumption, but infrastructure activity and housing demand continue to provide a stable base. Analysts believe the stronger message lies in pricing discipline rather than demand acceleration.

Looking ahead to FY27, management commentary across companies suggests a stronger focus on profitability. Nomura expects that price increases in the range of Rs 40 to Rs 50 per bag could be attempted during April and May in South India, significantly higher than the incremental hikes seen in recent years.

Rural recovery is expected to play a critical role in driving volume growth next year. Improved agricultural income and housing activity in non urban regions could help offset any slowdown in government capital expenditure. Industry volume growth is projected at 7 to 8 percent in FY27.

With consolidation strengthening pricing power and demand fundamentals stabilizing, the cement sector could witness a healthier balance between volumes and margins over the next few years.