The Indian cement industry is witnessing an active attempt by cement dealers across the country to raise prices in the second half of the fiscal year. However, whether these price hikes will be sustainable remains uncertain, as multiple factors, including demand recovery and industry consolidation, could significantly influence their longevity.
Recent reports from brokerages like Jefferies and JPMorgan indicate average price hikes of 3–4%, amounting to Rs 8–12 per bag. Some regions, particularly the South and East, have experienced more substantial hikes, with prices increasing by Rs 5–50 per bag. In December, CLSA observed price hikes ranging from Rs 20–30 per bag in East and Central India, while other regions saw a more modest increase of Rs 10 per bag. However, experts are divided on whether these price hikes will be sustainable in the long term. A key issue is the lack of consistent demand growth. Cement demand in early 2024 was disrupted due to heavy monsoons, elections, and labor shortages, while November saw subdued demand owing to festivals and extreme weather conditions. Though a recovery in demand is expected by December, analysts like JPMorgan have cautioned that if demand does not pick up as anticipated, cement companies might be forced to roll back their price hikes.
Industry observers, including Jefferies, highlight that several players in the market are still prioritising volume targets over price hikes, attempting to capture market share with lower prices. This aggressive strategy could undermine the overall pricing discipline and dampen meaningful price recovery in the short term. Consolidation within the industry also poses a challenge. Increased competitive intensity, coupled with aggressive capacity additions, could limit the scope for substantial price hikes in the near future. Nuvama, Morgan Stanley, and Jefferies all suggest that the cement market may experience sideways price movements for the rest of the fiscal year.
Despite these challenges, analysts remain optimistic about the long-term growth prospects of the cement industry. A key factor in this optimism is the importance of price recovery. As Jefferies noted, a 1% change in prices can lead to a 4–5% change in the EBITDA of cement companies, which is more impactful than volume growth alone. Looking ahead, analysts believe that companies with pan-India franchises and cost-improving capabilities will be better positioned to weather market fluctuations. Companies like Ambuja Cement and UltraTech Cement are expected to outperform domestic peers in 2025, thanks to their strong growth visibility and cost-saving initiatives. Moreover, JPMorgan has highlighted UltraTech’s focus on consolidation as a key strength, while also favoring ACC Ltd. for its better valuations and momentum in the South.
