Cement sector margins remain strained amid weak demand

India’s cement sector may witness continued pressure on profitability over the next one to two quarters due to rising input costs and sluggish demand, according to a report by Systematix Institutional Equities. 

  The report said elevated fuel, packaging and raw material expenses are likely to weigh on margins despite recent price hikes across regions. 

 Pan-India average cement prices increased by ₹10-13 per bag in May on a month-on-month basis as companies attempted to offset higher costs. However, analysts cautioned that sustaining these hikes could remain challenging because of weak market demand.

  Southern markets recorded the sharpest rise in prices. Telangana and Andhra Pradesh saw hikes of ₹20-25 per bag, while Kerala and Tamil Nadu witnessed relatively lower increases of around ₹10 per bag amid subdued demand conditions. Average cement prices in the region rose to nearly ₹345 per bag from ₹325 in April.

  In northern India, prices increased by around ₹10 per bag, supported mainly by stronger demand in Rajasthan. However, Delhi and Punjab reported smaller gains of nearly ₹5 per bag. Eastern markets such as West Bengal and Odisha saw prices rise by around ₹14 per bag, while Bihar and Chhattisgarh recorded increases of ₹9-10 per bag.  The report noted that demand momentum weakened across most regions due to labour shortages linked to the wedding season, state elections and reverse migration for agricultural activities. This marked a reversal from the stronger volume growth witnessed in the previous quarter. 

  Analysts said pricing remains the key tool for cement companies to protect margins, but their ability to pass on higher costs will depend on a recovery in construction activity.                        

—ANI