South India sees steepest cement price drop in Q3FY26. Is there a quick fix?
Channel checks by some brokerages suggest that dealers in the South may attempt to pass on price hikes in January. However, sustaining potential price increases in the near term can be challenging
Cement companies have exited the December quarter (Q3FY26) with prices correcting sequentially across regions. This is raising concerns of pressure on profitability amid muted realizations.
Average all-India cement prices fell 1.6% quarter-on-quarter in Q3FY26 to ₹336 per bag of 50 kg, as per Elara Securities (India).
A key drag on the overall pricing trajectory came from the southern region, which registered the steepest sequential drop of 3.9% to ₹304 due to subdued demand. After witnessing the sharpest price hikes of nearly ₹20-45 per bag in April, cement prices in the south have consistently trended downward and ended 2025 on a weak note, said the Elara report dated 30 December.
Prices in Tamil Nadu and Kerala fell by around ₹5 per bag, while prices in Karnataka, Andhra Pradesh and Telangana were flat month-on-month in December.
The problem of the South? The region has been primarily experiencing an oversupply, along with relatively lower demand growth. But heightened competitive intensity lately has exacerbated the pain on prices.
The recent acquisitions of Penna Cement and Orient Cement by the Adani group and The India Cements Ltd by UltraTech Cement Ltd are expected to increase the regional and pan-India presence of these larger manufacturers.
But this chase for market share is delaying pricing revival in the industry. The Ramco Cements India Ltd and Dalmia Bharat Ltd are among the other companies that have exposure to this region.
In this backdrop, a quick respite to the demand-supply mismatch woes seen in the South is unlikely. “South region is expected to witness the second-highest addition of capacities over the next four years, totalling 46 million tonnes per annum," said the PL Capital report on 31 December.
Expectations are that cement demand in the region would get a push from Andhra Pradesh and Tamil Nadu, which should help low utilisation levels recover, but that will be slow.
PL Capital notes that while a lot of infrastructure projects have been announced by these state governments, implementation has been delayed over the last six months. The brokerage expects the utilisation level in this region to inch up gradually over the next three years to 62% from 61% in FY25.
Meanwhile, channel checks by some brokerages suggest that dealers in the South may attempt to pass on price hikes in January. However, sustaining potential price increases in the near term can be challenging, as the upcoming festivals of Makar Sankranti and Pongal may temporarily impact construction activity and lead to a labour shortage.
topics
