Cement companies typically focus on pushing volumes in the seasonally strong March quarter (Q4) to meet year-end sales targets. Amid healthy demand, the sector saw marginal price hikes in February in select markets.
Quarter-to-date in Q4FY26, West is leading with a sequential price growth of around 3% with average price at ₹366/bag, said a Jefferies India report dated 1 March. One cement bag weighs 50 kilograms.
“Dealers in Ahmedabad said that hike attempts are being made slowly by companies to revert to stronger pre-September levels,” added Jefferies.
Regional tailwinds
Infrastructure momentum is aiding demand. The Mumbai-Ahmedabad bullet train late-stage work is in full swing, driving cement volumes in the region. Pan-India focused UltraTech Cement and Ambuja Cements having exposure to this region should benefit.
However, potential labour shortages due to Holi and continued volume push may limit steep price hikes across most markets in March.
Nonetheless, moderate price hikes along with improving leverage are positives; JM Financial Institutional Securities anticipates Ebitda/tonne expansion of >Rs200 sequentially in Q4FY26.
Fuel spike
On the flipside, costs of key input materials international coal and imported petroleum coke have risen, following the surge in crude oil prices.
“The US CFR (Code of Federal Regulations) petroleum coke prices rose around $13/tonne month-on-month in February, with spot levels reaching around $135/tonne, marking a 52-week high. This implies a cost escalation of about Rs140-150/tonne (about Rs7-8/bag),” said JM’s report dated 1 March.
Power & fuel costs account for an estimated 30-35% of the sector’s production cost.
Typically, cement companies import petroleum coke and stock fuel inventories for two-three months, which means the profitability impact comes with a lag. This time, the impact is likely to be reflected from H1FY27.
The margin dent will vary depending on fuel usage. For instance, petroleum coke comprised 45% of UltraTech’s Q3FY26 fuel mix; followed by JK Cement at 60% and Shree Cement at 76%.
Margin risks
Costs may rise further amid ongoing tensions in the Middle East. If cost inflation is not passed on, at least partially, it could hurt the FY27 margin outlook.
Companies are widely expected to attempt price hikes in April. Demand is likely to be supported by government spending on infrastructure and housing projects.
Cement companies are undertaking various cost-saving initiatives and increasing the use of alternative fuels to counter fuel price volatility.
For now, however, adequate and sustainable price hikes remain the crucial trigger for meaningful earnings upgrades in the sector.