MUMBAI: India’s cement makers are bracing for a prolonged margin squeeze as rising fuel, freight and packaging costs, triggered by the West Asia conflict, test pricing power amid signs of demand softness.
Companies are responding with fuel substitution, long-term sourcing contracts and efficiency measures, but analysts say these steps are unlikely to fully offset near-term cost pressures as construction activity slows.
A Mint analysis of the top five cement companies shows three reported a year-on-year decline in fourth-quarter profits (Q4FY26) as higher input costs weighed on earnings.
At the same time, executives and analysts say the sector’s ability to protect margins will depend on how far price hikes and operational efficiencies can offset structurally higher fuel and logistics costs.
Cost pressures
India’s largest cement maker, UltraTech Cement, said scale and procurement strategy are helping cushion the impact.
“There are several measures…diversifying our sources of procurement, identifying newer opportunities to deal with the situation, and entering into long-term fuel contracts, which are now turning beneficial for us,” chief financial officer Atul Daga said during a post-earnings interaction on 27 April, after the company reported March-quarter earnings that beat expectations on stronger volumes and tighter cost control.
The strong performance came despite escalating costs. Earnings before interest, taxes, depreciation, and amortization (Ebitda) climbed 21% to ₹5,600.3 crore, surpassing analyst estimates of ₹5,277.2 crore.
Energy expenses, which account for more than a quarter of total costs for cement makers, have risen as the West Asia conflict pushes up crude oil and related fuel prices. The disruption has also affected polypropylene supply chains, a key raw material for cement packaging bags.
UltraTech, which recently crossed 200 million tonnes per annum (mtpa) in capacity, is leaning on procurement scale. Daga said India has nearly 150 bag suppliers, which naturally prioritize large-volume customers.
However, he cautioned that the diesel prices could rise going ahead, with the full impact likely to emerge over the next few months.
Other cement makers are also shifting fuel mixes as imported input costs rise.
Managing director Puneet Yadu Dalmia said Dalmia Bharat was exploring alternatives to imported pet coke as prices surged to around $160 per tonne, while rupee depreciation worsened costs. The company is also accelerating its renewable energy push.
Petcoke prices are up about 30% since the West Asia conflict erupted, as per industry estimates.
“As petcoke gets more expensive, we have to look at alternatives, and that's exactly what we are doing with washed coal, local petcoke and alternates,” chief financial officer Yatin Malhotra told analysts during a post-earnings conference call on 28 April.
Dalmia Bharat's net income fell 11% year-on-year to ₹387 crore in Q4FY26 due to higher input, fuel and freight costs.
At Nuvoco Vistas, managing director Jayakumar Krishnaswamy said the company was reducing imported pet coke usage by increasing domestic coal sourcing and replacing imported mineral gypsum with flue gas desulphurisation (FGD) gypsum sourced from nearby thermal power plants.
“A big initiative we are doing is to find out how we can supplement mineral gypsum with FGD gypsum,” Krishnaswamy told analysts in April, adding that procurement teams are working with nearby power plants to increase usage across facilities.
Gypsum helps prevent cement from hardening immediately when mixed with water.
Nuvoco acknowledged that packaging costs remain difficult to control, saying there is currently “no clear-cut way forward” on cement bags and the company would have to absorb some of the increase.
Outlook risk
Analysts have warned that the efforts may be insufficient to protect margins if demand weakens further.
“Shifting part of the fuel mix from pet coke to thermal or domestic coal may provide some relief, but the savings are limited,” said Satyadeep Jain of Ambit Capital, noting that Indian coal’s high fly ash content restricts its use in kilns.
Jain said fuel costs remain volatile and recent cement price hikes are “not sufficient to offset the rising costs”.
Cement companies have raised prices by ₹15–20 per 50 kg bag, lifting all-India average prices by about 5% in April compared with March, according to a Motilal Oswal report dated 10 April.
While companies expect June quarter margins to remain largely flat, Jain said this was “not necessarily a positive outcome”, given it is typically the strongest period for cement demand and pricing.
Demand has already softened due to extreme heat, labour shortages and slower construction activity, he said.
Jain warned that from Q2 (July-September), margins could face sharper pressure from higher input costs, weaker monsoon demand, lower volumes and rising fixed costs. In the near term, margin pressure is inevitable despite cost-control measures, he added.
Against this backdrop, some cement companies are also easing the pace of expansion.
During its Q4 analysts call, Billionaire Gautam Adani-owned Ambuja Cements said it was open to deferring its FY28 target of reaching 155 mtpa capacity to FY30 as it focuses on improving utilization levels at existing plants.
Following Ambuja’s comments, Shree Cement, India’s third-largest cement maker by capacity, has also softened its expansion stance.