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Input Costs Rise Across Cement Industry

India’s cement manufacturers are expected to witness a decline in operating margins of ₹50-75 per tonne during the current financial year as geopolitical tensions in West Asia continue to push up fuel and logistics costs. According to a CRISIL analysis, rising prices of imported petcoke and coal are increasing production expenses, putting pressure on profitability across the sector.

The impact is expected to be felt despite healthy demand from infrastructure and housing projects.

Fuel Prices Drive Cost Pressures

Petcoke and imported coal remain critical fuels for cement production, and their prices have climbed sharply following disruptions linked to the conflict in West Asia. Higher freight and transportation costs have further added to manufacturers’ expenses, making it difficult for companies to fully offset the increase through efficiency measures alone.

The combination of elevated fuel costs and logistics expenses is expected to compress operating margins during FY27.

Demand Remains Strong

Despite higher production costs, demand for cement is expected to remain resilient, supported by continued government infrastructure spending, urban development projects and steady housing construction. Industry analysts believe healthy sales volumes should help cushion some of the impact on profitability, particularly for larger manufacturers with diversified operations.

However, companies may still face challenges in maintaining margins if input costs remain elevated for an extended period.

Limited Scope For Price Hikes

Although cement producers may attempt to increase prices to recover higher costs, competitive market conditions could limit their ability to pass on the entire burden to customers. Regional competition and ongoing capacity additions are expected to keep pricing discipline under pressure, particularly in price-sensitive markets.

Larger players with stronger operational efficiencies are likely to be better positioned to absorb the higher costs than smaller manufacturers.

Industry Outlook

The sector is expected to remain fundamentally strong over the medium term, driven by India’s infrastructure expansion and real estate growth. However, sustained geopolitical uncertainty and volatile energy prices will continue to be key risks for profitability in the coming months.

Summary

CRISIL expects Indian cement manufacturers’ operating margins to decline by ₹50-75 per tonne this fiscal due to rising petcoke, coal and freight costs triggered by the West Asia conflict. Strong infrastructure demand should support sales volumes, but limited pricing power and elevated input costs are likely to keep profitability under pressure.

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