Mumbai: The cement industry is bracing for a sharp price increase in April as the fallout from the war in West Asia drives up production costs. UltraTech Cement Ltd, India’s largest producer, is set to be the first to increase its price, according to an executive in the know.
A price hike by the market leader is likely to trigger similar moves by other cement makers, who are under even greater pressure from higher costs, given their relatively smaller scale.
“Nobody will increase cement prices now as they need to meet the year-end targets, but price increase will be seen in the month of April, and cost will be passed on to the consumers,” said the executive quoted above, requesting anonymity, discussing business strategy.
Emails sent to UltraTech did not elicit a response till press time.
The rise in cement prices is expected to marginally increase construction and infrastructure costs, as cement typically accounts for around 5% of total construction cost, according to Satyadeep Jain, lead analyst for cement, metals, mining and utilities at Ambit Capital.
“Cement companies will need ₹20/bag price hike to fully offset cost Inflation vs typical ₹7-8/bag hike in April. It’s possible cement companies don’t pass on the entire cost increase in one go, and we see margins being fully restored over time,” Jain said.
A cement bag weighs 50 kgs.
The West Asia war has disrupted supply chains, particularly affecting the availability of polypropylene, a key raw material used to manufacture cement packaging bags, commonly referred to as bori. Refiners have worsened the crunch by prioritizing crude derivatives for LPG production, tightening supply for packaging applications, Mint reported earlier.
Dearth of packaging material
For now, UltraTech has a low inventory of polypropylene bags, the executive said. Mint could not independently verify how many days of inventory were with the cement maker.
Besides the packaging cost escalation, the war has also led to higher prices for key kiln fuels such as petcoke and coal. Freight and logistics costs have also risen, further burdening cement manufacturers.
Industry experts note that price hikes in April are a recurring trend. Companies typically prioritize volumes in March, the final month of the financial year, often keeping prices stable to meet sales targets. With the start of the new fiscal year, however, the focus shifts toward improving margins, leading to price revisions.
“Cement price hikes in April are a well-established industry trend, as companies typically prioritize volumes in March, often keeping prices stable. With the new financial year, focus shifts to margins, leading to price increases,” said Bhavik Vora, partner and transport and logistics leader, Grant Thornton Bharat.
This year, however, the pricing pressure is expected to be more pronounced due to elevated input costs.
“In FY27 this trend is likely to be more pronounced due to rising input costs viz. petcoke prices (around $130+ per tonne), along with elevated crude-linked expenses such as fuel, freight, and packaging, exerting significant pressure on production and distribution logistics costs,” said Vora adding that consequently, manufacturers are expected to implement price hikes in the coming months.
Other cement players are adopting a wait-and-watch approach before revising their prices, taking cues from the market leader.
Emails sent to Ambuja Cements, Shree Cements, Dalmia Bharat and Nuvoco Vistas did not elicit a response.
“We will follow the market leader and wait for them to raise prices,” said another executive from one of India's 10 largest cement companies, requesting anonymity.
Fuel hikes
Fuel costs could rise by ₹160-200 per tonne in the April-June quarter compared with the October-December quarter, adding to margin pressures, analysts said. Higher packaging costs alone could have an incremental impact of ₹70-80 per tonne, further squeezing profitability, Mint reported earlier.
These cost escalations could significantly impair cement companies' profitability. Cement manufacturers reported an Ebitda of ₹825 per tonne of cement during the October-December quarter, according to Motilal Oswal analysts. This means that the fuel and packaging cost increases alone could wipe out a fourth of an average Indian cement company's Ebitda.
Despite these headwinds, demand for cement is expected to remain resilient. Strong activity in infrastructure and real estate is likely to support consumption, even as prices rise, according to Grant Thornton Bharat.
“While higher prices may slightly moderate retail demand, overall consumption is expected to remain resilient,” Vora said. Major infrastructure projects will sustain cement demand despite higher prices, preventing any significant near-term consumption slump.
