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Cement prices remain steady amid healthy demand growth

Industry volume growth estimated at ~8-9% YoY in Jan’25

* Cement demand, which recorded an impressive growth of ~8-10% YoY in NovDec’24, has continued to maintain strong momentum in Jan’25. According to our channel checks, industry volume is estimated to grow in high single digits (~8-9%) YoY in Jan’25. The start of the peak construction period, a pick-up in government spending, and sustained demand from the real estate sector are driving improvement in cement demand. In 9MFY25, the industry volume growth stood at ~3% YoY. We anticipate industry volume to grow ~4% YoY in FY25, implying ~7-8% YoY growth in 4QFY25. ? The all-India average cement price largely remained flat MoM in Jan’25. Prices have moved up ~2% in the West region, while they have declined ~1-3% in the South and East regions. Moreover, prices remained flat in the North and Central India. The all-India average cement price in exit-Jan’25 was up ~2% compared to the 3QFY25 average, while it remained flat compared to exit-Dec’24.

* Dealers indicated that cement players are attempting price hikes in early Feb’25 in certain markets (North, Central, Gujarat, and Bihar). However, the sustainability needs to be monitored, given the aggressive sales targets and higher competitive intensity. ? Spot imported petcoke price increased ~11-12% MoM to USD110/t (up ~18% from the recent low of USD93/t in mid-Oct’24). Domestic petcoke prices surged ~7% MoM to INR13,450/t in Feb’25 (up ~16% from the recent low of INR11,637/t in mid-Oct’24). Meanwhile, imported coal (South Africa) prices remained range-bound and flat MoM at USD103/t. A surge in spot petcoke prices and rupee depreciation are expected to increase fuel consumption costs by INR50-60/t in 1QFY26 compared to the 2HFY25 average fuel costs.

Industry volume to grow ~4% YoY in FY25E

* In 9MFY25, the industry experienced modest demand growth of 3% YoY. 1HFY25 experienced subdued growth of ~2% YoY due to the general elections, followed by an intense monsoon season across the country. However, cement demand recovered after the festive season, leading to a ~5-6% YoY volume growth in 3QFY25. We anticipate industry volume to grow ~4% YoY in FY25, implying ~7-8% YoY growth in 4QFY25E.

* The demand growth momentum has continued in Jan’25, and cement volume is likely to grow in high single digits (~8-9%) YoY, led by a pick-up in construction activity, increased government spending, and strong demand from individual housing and real estate.

* In the latest budget, though, capital spending towards infrastructure (rail/road projects) remained flat YoY, allocation for housing schemes was raised compared to that in FY25RE. Further, the rate cut announced by the RBI will enhance demand growth in individual housing and real estate segments.

* In 3QFY25 the aggregate volume of cement companies under our coverage grew ~8% YoY (+1% vs. our estimate), higher than the industry growth, led by market share gains by leading players. Most managements have guided for industry volume growth of ~6-7% YoY in FY26E.

Mixed pricing trend in Jan’25; need to monitor potential immediate hikes

* The all-India average cement price remained flat MoM in Jan’25. Prices have increased by ~2% in the West region, led by price hikes in the Maharashtra markets, while in Gujarat, prices largely remained flat MoM. Prices have declined ~2-3% MoM in the South region (across markets), partly due to a sluggish demand and volume push by cement players. In the East region, prices declined ~1% MoM due to a price drop in Odisha and West Bengal markets, while in Bihar and Chhattisgarh, prices remained flat. In the North and Central regions, trade prices remained flat. However, non-trade prices have increased (INR5/bag), led by an improvement in demand from government projects.

* In early Feb’25, cement players are aiming for a price hike of INR5-15/bag in certain markets (North, Central India, Gujarat, and Bihar). However, sustainability in the near term needs to be monitored, given the aggressive sales targets and higher competitive intensity (as some leading players are continuously focusing on market share gains).

* Blended realization in 3QFY25 for our coverage cement companies increased ~1% YoY (1% below our estimates).

Spot petcoke price increases; spot imported coal price remains flat MoM

* The average petcoke price (both imported and domestic) grew ~2% MoM in Jan’25. However, spot petcoke prices (imported) increased sharply ~11-12% MoM to USD110/t (up ~18% from the recent low of USD93/t in mid-Oct’24). Additionally, domestic petcoke prices increased ~7% MoM to INR13,450/t in Feb’25 (up ~16% from the recent low of INR11,637/t in mid-Oct’24). The average imported coal (South African) price declined ~6% MoM in Jan’25, while spot imported coal (South Africa) prices remained flat MoM at USD103/t.

* The surge in spot petcoke prices and rupee depreciation are estimated to increase fuel consumption cost by INR50-60/t in 1QFY26 compared to the 2HFY25 average fuel costs.

* In 3QFY25, fuel consumption costs for our cement coverage companies stood between INR1.31/Kcal and INR1.76/kcal. JKCE/SRCM/TRCL reported a higher sequential decline in fuel consumption costs by ~9% (each) in 3QFY25, followed by UTCEM/DALBHARA/JKLC with a 4%/4%/3% decline. Meanwhile, an increase in fuel consumption costs was posted by ACC/ACEM at 7%/4% and BCORP at 2% QoQ in 3QFY25.

Outlook and recommendation

* We estimate strong cement demand in 1HCY25, led by the peak construction period, a demand recovery in rural markets, an increase in government spending, and sustained real estate demand. We estimate cement demand to grow ~6-7% YoY in FY26. However, leading players are estimated to report higher volume growth, led by capacity expansions and market share gain.

* We continue to prefer players with a balanced geographic mix, higher capacity utilization, and a strong track record of capacity expansion and successful integration. Further, we are positive on companies that have a strong presence in North, Central, and West regions. We believe these regions are less vulnerable to the demand-supply mismatch and volatility in cement prices.

* UTCEM is our top pick in the large-cap and we prefer JKCE in the mid-cap space.

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