- Cement companies plan a second price hike of Rs 10-25 per bag from May 5
- Southern and eastern markets may see larger increases than northern and western regions
- Demand remains weak, risking incomplete absorption of higher prices by end users
Cement companies are preparing for a second round of price hikes in May, even as weak demand raises concerns about how much of the increase the market can absorb. According to distributor inputs, cement prices are likely to rise by Rs 10-25 per bag from May 5, following an earlier hike in April.
This marks the second price revision in less than a month. In April, companies had increased prices by around Rs 10 per bag, largely attributed to rising input costs linked to geopolitical tensions in the Middle East.
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The upcoming hike is expected to vary across regions. Southern markets could see the sharpest increase of about Rs 25 per bag, while the East may witness hikes in the range of Rs 25-30 per bag. In comparison, northern and western regions are likely to see relatively moderate increases of Rs 10-15 per bag.
Despite these hikes, demand conditions remain subdued. Distributors indicate that construction activity has not picked up meaningfully, which could make it difficult for companies to fully pass on higher costs. This raises the risk that the latest price increases may not be completely absorbed by end users, potentially impacting volumes.
The cost pressures driving these hikes are significant. A key factor is the sharp surge in polypropylene prices, which are used in cement packaging. Prices of polypropylene have reportedly jumped as much as 70%, creating a substantial cost burden for manufacturers.
At the same time, freight costs have risen by 10-15%, further squeezing margins. Logistics alone accounts for nearly 20-25% of the total cost of cement, making it a critical component of overall expenses.
The ripple effects of higher cement prices are likely to be felt across core sectors of the economy. In real estate, cement contributes roughly 18-22% of total construction costs, meaning sustained price increases could push up project costs for developers. Infrastructure projects are even more exposed, with cement usage accounting for 80-90% in segments such as roads, bridges, and dams.
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From a market perspective, several major cement stocks will be in focus, including UltraTech Cement, Ambuja Cements, Shree Cement, Dalmia Bharat, and JK Cement. Investors will be closely watching how these companies manage pricing power amid weak demand conditions.
Analysts remain cautious on the sector's near-term profitability. They suggest that the current round of price hikes may still fall short of fully offsetting the rise in input and logistics costs. As a result, operating margins could come under pressure in the first quarter of FY27. Estimates indicate margins may decline by 25-30% sequentially, with year-on-year contraction potentially as steep as 45%.
To fully neutralise cost pressures, analysts believe that a cumulative price hike of around Rs 50 per bag would be required. However, given the fragile demand environment, such aggressive pricing may not be feasible in the near term.
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