Cement makers' profit likely to decline in Q1FY27 on higher fuel costs: Ind-Ra

Profitability of Indian cement manufacturers is likely to come under pressure in the first quarter of FY27 on account of a sharp increase in fuel, freight and other input costs, besides product price hikes by industry players, according to a report by India Ratings and Research (Ind-Ra).

The ratings agency said that operating costs and key raw materials, including pet coke, coal, diesel and packing materials, increased during the quarter, adversely impacting the sector’s margins.

”The cement industry is likely to witness a decline in profitability in 1QFY27, given the increase in key input costs, including pet coke, coal, diesel, and packing material. While some price hikes were taken by industry players, it is unlikely to be sufficient to cover the increase in production costs,” it said.

However, with the softening in the prices of crude and pet coke in the past month, the industry could see some respite in production cost over the next couple of quarters, it said.

The report, however, also added that cement demand is expected to grow at a mid-single-digit rate year-on-year in the April-June quarter of FY27, following a healthy 8% growth in FY26.

Listed cement companies reported around 6% year-on-year volume growth in the January-March quarter of FY26.

The agency said cement demand started FY27 on a strong note, with production volumes rising 9% year-on-year in April, compared to 6 per cent growth in April 2025.

However, demand growth may have moderated during May and June due to adverse weather conditions, including heatwaves and rains in various parts of the country, along with higher inflationary pressures.

”Despite inflationary concerns, the core industry data indicate that cement demand was off to a good start in FY27, with production volumes growing 9 per cent y-o-y in April 2026 . However, the growth rate could slow down in May and June 2026, led by a combination of weather factors (heatwave, rains in different parts of the country) and higher inflation,” it said.

Ind-Ra said cement prices witnessed a sequential increase after remaining subdued in the fourth quarter of FY26, as manufacturers attempted to pass on the impact of higher fuel costs triggered by the West Asia crisis.

”After 1 per cent y-o-y growth in 4QFY26, cement prices have risen recently, as the increase in fuel costs emanating from the West Asia crisis has increased production costs for cement companies. Power and fuel together account for around 30% of the total cement costs, making profitability highly sensitive to movements in pet coke and coal prices,” it said.

Global pet coke prices surged to around $160/MT in April 2026, while international thermal coal prices also increased by around 20% over the period, materially steepening the industry cost curve for 1QFY27. However, pet coke prices have eased to around $130/MT in June 2026, which should provide some respite to the industry during 2QFY27.

Freight is another key cost driver, accounting for 25-27% of costs and closely linked to diesel prices. The government announced an increase of close to ₹7.5/litre in diesel prices in May 2026, marking a high single-digit increase.

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