Weak Demand, Rising Competition Pull Cement Prices Down 7% In April-January FY25: Ind-Ra

Cement prices declined around 7% year-on-year in April-January period of the financial year 2024-25, amid weak demand, and increasing competition due to large supply additions by leading companies, according to a report by rating agency Ind-Ra.

Though prices of cement (a bag of 50 kg) have increased sequentially from November 2024 with construction activities picking up pace following the monsoon and festive season, they remain low year-on-year, it said.

"While the prices are likely to improve in the seasonally stronger Q4, large capacity additions are likely to keep the overall pricing environment weak; FY25 is likely to witness a high single-digit decline—the highest in the past decade," it said.

It further said the volume ramp-up from some of the acquired capacities that were operating sub-optimally earlier would keep the prices under pressure over the near term.

Consolidation continues in the cement sector, where big players such as UltraTech Cement, Adani Cement, Shree Cement, Dalmia Bharat are acquiring small companies, chasing inorganic growth besides brownfield expansions.

"In 10MFY25, the cement industry saw around 45 million tonne of capacity changing hands across five deals, majority in the southern region. This has increased the share of the top five companies to around 60%, up from around 55% in FY24," it added.

In January 2025, Nuvoco Vistas Corp., the building materials division of the Nirma Group, emerged as the successful resolution applicant for Gujarat-based Vadraj Cement.

Aditya Birla group's flagship firm UltraTech Cement completed the acquisition of India Cements in December 2024 and also made a non-controlling financial investment in Star Cements in that month, acquiring an 8.42% shareholding.

"Ind-Ra believes there is still scope for further consolidation in the cement sector in the near-to medium-term, given the presence of small-to-mid-sized companies and the continued race for market share," it said.

Moreover, overall performance of the cement industry is expected to "remain subdued in FY25" despite a pickup in the current fourth quarter on account of a weaker first half.

"After the muted growth of 2-3% YoY in 1HFY25, cement demand picked up in 3QFY25 and grew at a high single digit. However, the weak H1 restricted the demand growth in 9MFY25 to around 3.5% YoY, the lowest in the past six years with only listed entities faring marginally better," it said.

The slowdown in the growth was largely due to a weak infrastructure demand following a subdued pick up in the union government’s capex after the general elections, registering a 12% YoY fall in 8MFY25.

Over the cement prices, the report said it "declined around 7% YoY in 10MFY25, amid the weak demand and increasing competitive intensity, given the large supply additions".

Although the prices have increased sequentially from November 2024 with construction activities picking up pace following the monsoons and festive season, they remained low YoY.

"The southern region is likely to have witnessed the sharpest contraction given the oversupply, followed by the eastern region," said Ind-Ra.