New Delhi [India], November 28 : Cement prices are expected to remain under pressure in the coming months as rising supply and a surge in capacity additions intensify competition across regions, according to a recent report by Axis Capital.
The report highlighted that cement pricing has turned negative amid an estimated 40 million tonnes (mnt) of capacity addition, or nearly 6 per cent, scheduled over the next four months.
With supply growing faster than demand, the pan-India average cement price declined 2.1 per cent month-on-month (MoM), or Rs 6 per bag, in November.
"We remain concerned about the sector outlook over the medium term due to significant capacity addition pipeline .......over the next 18 months, which is likely to pressure pricing and margins", the report said.
The steepest correction was recorded in East India, where prices dropped 4.8 per cent MoM, or Rs 14 per bag. This sharp decline was driven by a Rs 25-30 per bag dip in key markets such as West Bengal and Bihar.
Other regions also saw notable declines, with Central and South India witnessing price drops of 2.4 per cent and 2.0 per cent MoM, respectively. Prices in the West and North were relatively more stable, easing by 1.3 per cent and 0.4 per cent in the trade segment.
However, non-trade prices in these regions corrected by around 2 per cent.
Dealers across markets attributed the weaker pricing environment to rising competitive intensity as new supply entered the market.
While demand has begun to pick up after the Diwali period, the report noted that a high base, given the elevated volumes recorded during December 24-March 24-March 25, will likely subdue year-on-year growth in the coming months.
The report analysis also showed that spot cement spread at around Rs 1,950 per tonne is currently 7 per cent, or Rs 150 per tonne, lower than the Q2FY26 average. It is due to a combination of lower prices and higher fuel costs, with pet coke at Rs 1.75 per kcal5 per cent higher than the Q2 average, adding to pressure on margins.
The brokerage firm added that despite earlier expectations of steady prices in Q3FY26, especially after GST-led price cuts in September, most regions have witnessed a decline.
Based on its supply database, the sector is set to see capacity additions of nearly 40 mnt of cement and 26 mnt of clinker in the next four months alone.
The report expressed concern over the medium-term outlook for the sector, citing a robust capacity addition pipeline of around 80 mnt, or 12 per cent, over the next 18 months. This expansion is expected to continue exerting pressure on pricing and margins.
However, the report maintained a positive long-term view for the cement industry. It said ongoing sector consolidation and sustainable demand growth, projected at 1x to 1.2x of GDP growth, should help support pricing power and improve margins over time.
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