The Indian cement industry is witnessing a sharp and sustained increase in prices, a trend that is fuelling optimism about profit growth among leading manufacturers. Over the past few months, cement prices across several regions have climbed significantly, driven by rising input costs, strong demand from infrastructure and housing projects, and supply-side constraints.

According to industry trackers, average cement prices in key markets have gone up by ₹15 to ₹30 per 50-kg bag in the past quarter. The price hike comes even as the construction season remains robust, supported by heavy government spending on highways, bridges, and affordable housing projects under schemes such as Pradhan Mantri Awas Yojana (PMAY).

Industry analysts believe that this upward movement in prices is not temporary. Instead, it reflects a demand-supply gap that is likely to persist over the coming quarters. The cement sector in India is currently experiencing capacity utilisation levels close to 80–85%, which is considered healthy but also limits the ability to immediately expand supply to meet rising demand.

Why are prices rising?

Several factors are behind this sustained price increase:

1. Higher input costs – Energy expenses, particularly coal and petroleum coke prices, have surged in the global market. Since these account for a significant share of cement manufacturing costs, companies have had no choice but to pass on the burden to consumers.

2. Strong infrastructure demand – Mega infrastructure projects, both at the central and state levels, are creating unprecedented demand for cement. Road construction, urban metro projects, and industrial parks are some of the major contributors.

3. Housing sector revival – With interest rates stabilising, real estate sales have picked up, especially in Tier 1 and Tier 2 cities. This directly increases demand for building materials, including cement.

4. Limited new capacity addition – While some companies have expansion plans in the pipeline, it takes time to build new cement plants. This creates a situation where demand growth outpaces supply growth, pushing prices up.

Impact on manufacturers

For cement manufacturers, the rising price trend is translating into higher operating margins. Even with input cost inflation, the ability to raise selling prices has allowed them to protect and, in many cases, improve profitability. Large players such as UltraTech Cement, Shree Cement, and Dalmia Bharat have reported strong earnings in recent quarters and expect this momentum to continue.

The stock market has responded positively, with many cement company shares outperforming the broader indices. Investors are betting that the price discipline seen in the sector will hold, avoiding destructive price wars and ensuring stable margins.

Risks to watch

However, there are also potential risks. If commodity prices fall sharply, or if there is a slowdown in infrastructure spending due to fiscal constraints, demand for cement could soften. Additionally, any aggressive capacity expansion by major players might ease supply tightness and reduce pricing power.

Another concern is the impact on the construction sector, especially in affordable housing. Rising cement costs can push up project budgets, potentially slowing down low-cost housing projects where margins are already thin.

Outlook

Most experts believe that cement prices will remain elevated in the near term, supported by sustained demand and cautious capacity expansion. This will ensure that profit growth for manufacturers continues through the rest of the year.

For now, the combination of strong infrastructure push, revival in real estate, and supply discipline means the Indian cement industry is in a sweet spot. If these factors persist, 2025 could be one of the most profitable years for cement manufacturers in recent history.

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