Cement prices per 50 kg bag are expected to rise further in the second half of the year as infrastructure projects receive pending budget allocations, according to analysts. They add that political events are unlikely to influence pricing, and the recent rollback of prices in Chhattisgarh is viewed as an exception. Analysts also believe that the upcoming assembly elections will not pressure cement companies to reduce prices.
After nearly a year of declining prices, cement companies began reversing the trend in the third week of August, with increases ranging from Rs 10 to Rs 20 per bag across regions. However, the sustainability of these hikes remained uncertain. Dealers had suggested that only a portion of the increase may hold, as intermittent rains, heightened competition, weak demand in the non-trade segment and the upcoming festive and wedding season are expected to disrupt demand, according to a research report from brokerage Motilal Oswal released earlier this month.
Factors such as the general election, heatwaves during the summer and heavy rainfall received in the monsoon that followed have curbed the growth in cement demand. The all-India average cement price collapsed to a 51-month low between end-July and the first half of August, according to a report by Elara Securities dated September 26. On the demand side, there was a slight improvement in September compared with August.
As of now, factors such as the start of Pitru Paksha—the 16-day period in the Hindu calendar considered inauspicious—have led people to postpone starting new projects, according to the report. However, analysts expect a steady recovery in the second half of the year, fuelled by a rebound in infrastructure projects, which is likely to drive a significant increase in demand. "We believe weak demand and cement prices coupled with negative operating leverage are likely to hit the profitability of the industry in Q2FY25. However, we expect a gradual recovery in cement demand in the upcoming quarters which should enable the industry to take some price hikes," Elara analyst Ravi Sodah wrote in his report.
Among the states receiving approval for major infrastructure projects is Chhattisgarh, where the Union government has sanctioned the construction of over 8 lakh houses under the Pradhan Mantri Awas Yojana (PMAY) for rural areas. Following this, cement companies raised prices in the state by nearly 20 percent, according to reports. The hike prompted a political outcry in the state, causing the companies to roll it back.
When asked about potential political influence on cement price hikes, Axis Research analyst Uttam Srimal explained, "Cement prices are driven by demand and supply dynamics, so the upcoming assembly elections are unlikely to have a significant impact. Prices are expected to rise from the third quarter, and the second half of the year will likely be stronger for cement companies compared to the first."
Cement firms in various markets are expected to raise prices in the range of Rs 5-15 per bag in October, according to Elara. "Market intermediaries in most areas anticipate a demand uptick in the coming weeks, though the festival season could potentially limit growth," the brokerage added.
Analysts expect the government's announcement of an additional 2 crore houses under PMAY (Rural) over the next five years to boost growth in the cement sector, as housing remains the largest consumer of this essential building material.
During FY24, cement demand registered a 9 percent growth over the previous fiscal year. However, for FY25, demand growth is expected to moderate to around 6-7 percent due to the high base of the previous three fiscals. Despite this moderation, demand growth is projected at approximately 8 percent over the next couple of years, driven by strong demand prospects from the infrastructure and housing sectors, as well as increased consolidation within the industry, according to a note from Axis Securities.
India's cement industry is witnessing increased consolidation, with major players like UltraTech Cement, Adani Cement and Dalmia Bharat acquiring smaller companies to strengthen their market position. These mergers and acquisitions are driven by the need for scale, cost efficiencies and expanded geographic reach, especially as infrastructure demand surges across the country.
