Cement Prices Surge As Fuel, Gypsum Costs Escalate
For cement producers, fuel and gypsum are the biggest swing factors
(Photo Source: Envato)
Cement prices have seen a sharp escalation in the current fiscal, following upward pressure from input fuel costs, particularly petroleum coke (petcoke), industry sources said.
The all-India average cement price reached Rs 360 per 50-kg bag in May 2025, about 8% higher year-on-year after a steep decline the previous year. While regional differences persist - with eastern India seeing the sharpest increases (Rs 20 a bag in West Bengal) and western markets rising by a modest Rs 3 - the trend across the country is clearly upward.
May is the latest all-India data available.
Sources said demand remains robust, growing 9% in May to 39.6 tonnes, underpinned by housing and government-led infrastructure. Analysts forecast 6-7% growth in FY2026 volumes to 480-485 tonnes.
The strongest upward pressure is coming from fuel costs, particularly petroleum coke (petcoke), which constitutes over 50% of the cement industry's fuel mix. In the spot market, international petcoke prices surged 17%.
Typically, India's cement industry imports 12-14 million tonnes of petcoke annually from the USA (60%) and Saudi Arabia (25%). For Indian cement makers, this has added Rs 75 per tonne to costs - Rs 60 from the price increase itself and Rs 15 from rupee depreciation.
Given that fuel and power typically account for 30-35% of total production costs, such spikes immediately hit profitability. Companies like Shree Cement and JK Cement, which rely on petcoke for 70-95% of their energy needs, are the most exposed. Even with some relief from lower coal prices, the sector is facing renewed cost intensity.
'Global petcoke prices have climbed to nearly $115 per tonne, their highest in four months. For Indian cement producers, the challenge is compounded by the rupee's comparatively weaker performance - it has slipped by 2-3% against the dollar in recent months, making imports even costlier.
With petcoke forming more than half of the fuel basket for Indian cement players, this double blow is adding significantly to per tonne production cost. The knock-on effect on cement prices is inevitable until more high-grade domestic fuel alternatives are developed,' said Subhasri Chaudhuri, Secretary General, Coal Consumers' Association of India.
Gypsum is another crucial component in the production of cement and is vital in controlling the various quality and performance parameters like workability and setting time. Its prices have gone up due to high import dependence, international sanctions and restrictions, and the depleting purity of Rajasthan reserves and scarcity of J&K mineral gypsum.
Sources said even after recent hikes, India's cement prices at $92 per tonne remain competitive globally when compared with $90-100 in Bangladesh, $140 in the USA and $229 a tonne in Germany. China, with oversupply and property slowdown, has a lower price of $54 per tonne.
India's per capita cement consumption (280-330 kg) remains far below China (1,400-1,500 kg) and Turkey (730-780 kg), highlighting significant growth potential.
This demand runway, combined with competitive pricing, ensures India's global standing remains strong despite rising costs.
Analysts expect operating margins to improve 80-150 bps in FY26 to 16.5-17%, assuming prices hold and fuel moderates.
While GST reform (cutting the slab from 28% to 18%) may marginally ease the tax burden, it does little to counteract the fuel and gypsum shocks maintain or raise prices further.
For cement producers, fuel and gypsum are the biggest swing factors, and as long as they remain elevated, cement prices in India will stay firm, if not rise further, through FY2026, they added.
