Cement prices likely to stay flat in Q2FY27 as monsoon, rising costs squeeze margins: Report
New Delhi, July 14
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, while 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 quarter-on-quarter across regions. "Cement prices rose a modest ~2-3% QoQ across regions," it said.
It noted that offtake was subdued in May but improved in June as the delayed onset of the monsoon supported construction activity.
During the quarter, the 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 the total variable costs -- including packing costs by ~150/MT QoQ and lower-offtake-led op-lev loss could further raise opex by ~50/MT QoQ.
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 Rs 100 per tonne quarter-on-quarter to below Rs 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.
— ANI
Reader Comments
Home buyers will be happy if prices stay flat. But the industry needs to modernize — too dependent on coal and pet coke. Why not invest more in solar or waste-heat recovery? Long-term demand is strong, but we need sustainable cost management, not just hope for geopolitics to settle. 🤔
As someone who works in construction supply chain, this report confirms what we see on ground. Monsoon always kills Q2 demand, but rising fuel costs are the bigger concern. Good that HDFC sees a H2 rebound, but let's be honest — global uncertainties make predictions shaky.
"Margins down by Rs 100 per tonne" — that's significant. But I appreciate HDFC's long-term optimism. India's infrastructure spending is only going up, and with housing demand rising in tier-2 cities, cement companies that control costs will thrive. Patience is key! 💪
It's interesting how geopolitics in West Asia affects our cement prices directly. For consumers, flat prices are good news, but the industry needs more resilience. Maybe government should look at strategic coal reserves or alternate fuels. Just my two rupees. 💭
Flat prices + rising costs = lower margins. Basic economics. But the demand story is strong. My neighbour just started a small construction business, and he says work is steady despite monsoon. Let's hope the H2 recovery comes as predicted. Betting on UltraTech and Ambuja for now. 📈
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