Cement Makers Eye INR 7-INR 10 Per Bag Price Hike in January Amid Improved Demand
Cement manufacturers are planning a price hike of INR 7 to INR 10 per bag in January, anticipating sustained demand growth and a rise in construction activities. Following a price increase in December across key markets in North, Central, and East India, which ranged between INR 7–8 per bag, cement prices have remained stable, with no rollbacks or additional discounts. The prices in December ranged between INR 365 and INR 368 per 50-kg bag, marking a notable increase from the November exit price of INR 358–360 per bag. Industry participants are optimistic about January, citing a boost in demand due to ongoing infrastructure spending, especially on state roads and government disbursals.
The market expects this upward trend to continue, especially with the government’s anticipated infrastructure spending in the upcoming budget. One market participant mentioned that while the fiscal year will not experience a dramatic recovery, the second half of FY25 (October-March) is expected to see better demand conditions, particularly as the base effect of FY24 moderates. From FY22 to FY24, cement demand saw a compound annual growth rate (CAGR) of 11 percent, driven by robust infrastructure and rural development spending. However, demand has slowed down in FY25, with growth projected to be between 4.5percent to 5.5percent, mainly due to base effects, seasonal factors, and slower construction activities during the first half of FY25, impacted by heatwaves and labor shortages during the general elections.
Despite moderating growth, companies have added significant capacity, with 101 million tonnes (MT) of new capacity coming online in the last two fiscal years. Between FY25 and FY29/30, another 210-220 MT is expected to be added, representing a 5.5 percent–6.5 percent CAGR. Realizations are expected to remain under pressure, with operating margins hovering between 15percent and 16percent, lower than previous years. Cement prices reached a record high ofINR391 per 50-kg bag in FY23 but fell by 2 percent to INR 384 per bag in FY24. Given the moderating demand growth and increasing competition, prices are expected to decline by 5-6 percent in FY25.
Regional variations in price movements are anticipated, with North India likely to see stable prices, Western India following a flat trend, and Central India experiencing a potential dip. The Eastern region is expected to face the most significant price decline, with an 11-12 percent drop expected due to the addition of 30 MT of capacity in the last two years. In the South, prices are projected to fall 5-6percent after a 4percent dip in the previous fiscal year. While cautious optimism prevails in the market, overall, the mood remains one of restraint, with companies carefully navigating the pressures of rising competition and fluctuating demand.
