Before the West Asia war broke out, the cement sector had one problem to deal with: muted prices. Intense competition and chase for market share kept prices under pressure in FY26, but benign input costs provided solace. That comfort is now out of the window.
Higher fuel (petroleum coke and coal), freight/transportation, packaging and raw material costs are dimming the sector’s earnings prospects. Plus, with cheaper/previously bought fuel inventory exhausting and the Indian rupee’s depreciation, would hurt cement companies that heavily relying on imported fuels.
Systematix Shares and Stocks (India) cautions that the June quarter (Q1FY27) will be the most challenging one for the industry in terms of cost. Polypropylene granule cost surged from ₹99 per kilogram to ₹155 per kilogram, pushing packaging expenses higher by ₹80–100 per tonne, it said. Also, it estimates ₹150-200 per bag impact from dearer petroleum coke and coal.
Price struggle
In response, cement firms have raised prices, but the extent of absorption has been lower than desperately required. Price hikes in April (of around ₹10- ₹15 per bag) had to be partially rolled back in several markets due to uneven demand. In May, construction activities and project completions were hurt by labour shortages, heatwaves and higher competitive intensity. So, while construction activity is usually at peak in April and May, buoying demand and prices, this time the scenario is unfavourable.
Thus, average pan-India price in the trade segment was flat month-on-month at ₹326 per 50-kilogram bag, showed dealer channel check by Nomura Global Markets Research. In the trade segment, cement is sold by companies to dealers, who then sell it to consumers.
Spot cement spreads, a key leading indicator of industry unitary Ebitda, averaged ₹2,589 per tonne in Q4FY26, down ₹137 sequentially, as higher cement trade prices helped offset elevated costs, according to Nomura. However, with cost pressures mounting, in Q1FY27 so far, Ebitda slid to ₹2,495 per tonne, making price hikes in June crucial to protect margins.
While the industry has successfully implemented a sequential price rise of around ₹10 per bag so far in Q1FY27, pricing power appears increasingly insufficient to fully counter ongoing cost inflation, said the Nomura report dated 2 June.
Dealers are bracing for around ₹10-15 per bag price hike in June, notes Jefferies India, but adds that historically, cost shocks have been hard to pass through in the short term. Also, monsoons are a dampener for cement demand, so even if a near-term price hike is implemented, sustaining it would be challenging.
Apart from price increases, cement makers are trying to optimize their fuel mix; they are using more domestic coal and petroleum coke. The usage of green/renewable energy and alternative fuels is being scaled up to mitigate fuel cost volatility.
For instance, in Q4FY26, industry bellwether UltraTech Cement’s fuel mix comprised 41% petroleum coke versus 45% in Q3FY26, and green power share rose to 43%. For Shree Cement, petroleum coke accounted for 54% of the fuel mix, down from 76% in Q3FY26, while the green power share stood at 61%.
Stocks of large cement makers have declined 6-23% so far in 2026, with Adani Group companies Ambuja Cements and ACC falling more than 20% each. Cement stocks are trading at FY27 EV/Ebitda of 8-18 times, showed Bloomberg data.
With the risk of earnings downgrades looming, the stocks are likely to remain under pressure in the near term, especially if June price-hike attempts fail. On the bright side, war de-escalation and easing supply disruptions could provide a breather to companies.