Cement prices in India, which hit multi-year lows in FY2025, are now expected to witness a gradual recovery in FY2026, supported by infrastructure projects, government housing schemes, and a rebound in construction activity. However, the path ahead remains uncertain and varied across regions, depending on the interplay of supply additions, cost structures, and monsoon-related demand.

FY2025: A year of sharp price declines

According to data from brokerage firms and cement producers, average pan-India cement prices declined by 4-6% year-on-year in FY2025, reaching levels last seen in FY2019. The fall was more pronounced in the South and East India, where overcapacity and muted demand pushed prices down sharply.

Leading cement manufacturers such as UltraTech Cement, Ambuja Cements, and Shree Cement reported declining EBITDA per tonne due to weak pricing power, despite healthy volume growth in some quarters.

“FY2025 was a volume-led year for the industry, but pricing discipline collapsed in the second half,” said a senior analyst at Motilal Oswal Financial Services.

Chart of the Day: Pan-India Cement Price Trend (₹/50kg bag)

Source: Industry reports, company filings, Crisil Research

Why prices fell in FY2025

• Overcapacity: Continued capacity additions by large cement players in anticipation of future demand created regional price wars

• Muted private housing demand: Especially in rural and tier-2/3 cities, hurt price sustainability in H2 FY2025

• Weak monsoon: Led to reduced rural construction activity in key states like Maharashtra, Madhya Pradesh, and Uttar Pradesh

• Cost rationalisation pressures: Rising costs of power and fuel (especially pet coke and coal) further squeezed margins

What could support prices in FY2026

Despite the sharp fall, analysts and industry insiders suggest that cement prices may rebound or at least stabilise in FY2026, provided demand continues to strengthen and competitive intensity eases.

Here are the key drivers that could lift prices:

1. Infrastructure push

The Government of India has committed over ₹11 lakh crore in infrastructure spending under PM Gati Shakti, Bharatmala, and urban metro projects in FY2026. These will drive demand in urban clusters and Tier-1 cities.

2. Housing schemes

Schemes like PMAY-Gramin, PM Awas Plus, and the revised rural housing targets under Budget 2025-26 will boost cement demand in the second half of the fiscal.

3. Better monsoon forecast

The IMD has predicted a normal monsoon in 2025, raising hopes of higher rural incomes and housing activity revival from September onwards.

4. Price discipline

Industry leaders like UltraTech and Dalmia Bharat have indicated that they will focus on margin over volume in FY2026. This could help establish price discipline after a year of aggressive price cuts.

Region-wise outlook

• North India: Likely to see stable to rising prices on strong infra-led demand and relatively limited supply additions

• East India: Competitive pressure remains high due to large supply influx; prices may stabilise only by Q3

• South India: Volatile but may improve post-monsoon if construction demand revives in Tamil Nadu and Telangana

• West India: Prices expected to remain soft initially, especially in Maharashtra due to subdued private housing

Capacity additions: A double-edged sword

India’s total cement capacity stood at 575 million tonnes per annum (mtpa) at the end of FY2025. Nearly 40-45 mtpa is expected to be added in FY2026, largely led by Adani Cement, UltraTech, and JK Cement.

While capacity expansion is a sign of long-term optimism, it may delay near-term price recovery if not matched by proportionate demand growth.

“Utilisation rates must cross 75% consistently for prices to move meaningfully. In FY25, it hovered around 68-70%,” said a Kotak Institutional Equities report.

Key risks to price recovery

• Political uncertainty post Lok Sabha elections

• Cost pressures from imported coal and logistics inflation

• Delay in rural demand pick-up if monsoon is uneven

• Stiff competition in East and South India, where capacity additions are fastest

What analysts say

“We expect cement prices to firm up by 3-5% in H2 FY2026. The rebound will be gradual and more visible in the North and West,” — IIFL Securities

“The sector will remain volume-driven in Q1 and Q2. Margin expansion could return by Q3 if fuel costs stay soft and demand picks up,” — CRISIL Ratings

Conclusion

While FY2025 was challenging for India’s cement sector in terms of realisations, there are tentative signs of a turnaround in FY2026. Rising infrastructure activity, rural housing, and a better monsoon may provide the right conditions for price stability and margin recovery in the latter half of the year.

However, the large planned capacity additions and region-specific oversupply continue to pose challenges. The cement sector’s performance in FY2026 will largely depend on its ability to balance volume growth with pricing power.

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