The cement industry is unlikely to see a sequential increase in prices during Q2FY27E, as monsoon-led demand moderation is expected to weigh on the sector. Rising fuel costs and seasonal operating deleverage could pull down industry margins, according to a report by HDFC Securities.
On the pricing front, gains remained modest despite rising energy and packaging costs, with cement prices increasing by up to 3 per cent q-o-q across regions. “Cement prices rose a modest ~2-3% q-o-q across regions,” it said. Offtake was subdued in May but improved in June as the delayed onset of the monsoon supported construction activity. During the quarter, input cost pressures also intensified on the back of the West Asia conflict, which pushed up coal and pet coke prices in Q1FY27 and is expected to keep fuel costs elevated, with a likely peak in Q2FY27.
“The West Asia turmoil has driven up coal/pet coke consumption prices in Q1FY27E, and these are expected to peak in Q2FY27E, in our view,” it noted.
According to HDFC Securities, these factors can push total variable costs — including packing costs — by ~₹150/MT q-o-q and lower-offtake-led op-lev loss could further raise opex by ~₹50/MT q-o-q. Overall, cement prices are estimated to remain flat in Q2FY27 as monsoon-led demand weakens, while rising fuel costs and seasonal operating deleverage are likely to push industry margins down by over ₹100 per tonne q-o-q to below ₹880 per tonne. However, HDFC Securities expects margins to recover in H2FY27E if the West Asia turmoil subsides, leading to lower energy and packing costs.
The brokerage house remains optimistic over long-term demand. “We remain positive on long-term demand, which should also drive realisation. This, along with the expected cost cool-off, should lead to margin rebound H2FY27E onward,” it said.