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Demand and price hikes resilient; fuel cost relief expected

Cement channel checks indicate that the INR10-15/bag price hikes implemented across markets in early Oct’26 have largely sustained. Further price increases to pass on elevated input costs are expected after the festive season, subject to demand recovery and improvement in labor availability. Industry demand remained resilient in Oct’26 as monsoon disruptions eased and construction activity picked up across regions. The South and North witnessed relatively stronger demand; however West, East and Central regions saw a gradual recovery. On the cost front, fuel prices remained elevated at USD188-190/t (imported petcoke) and USD128/t (South African petcoke). However, sharp correction in crude oil prices to USD96/bbl (declined ~17% from its peak) provides a favorable backdrop for fuel cost moderation, although the benefits are likely to materialize with a lag.

All-India average cement prices improve MoM in Oct’26; demand positive

* All-India average cement prices (net of GST) increased by INR9/bag (~3%) MoM in Oct’26, supported by industry efforts to pass on elevated input costs. Price hikes were implemented across markets following the monsoon-led weakness in Aug-Sep’26. However, competitive intensity and varying demand conditions across regions continue to influence pricing, with further price hikes and their sustainability remaining key monitorables.

* Cement demand witnessed a gradual recovery in Oct’26 as monsoon-related disruptions eased and construction activity picked up across key markets. Infrastructure execution and government-led capex continued to support demand, while improving retail construction activity and individual housebuilding (IHB) demand aided volume offtake. We expect demand momentum to improve further in 2HFY27, backed by seasonal recovery and better construction activity. However, regional headwinds, including temporary bans on construction to curb pollution and deficient rainfall leading to drought-like conditions in select markets, could weigh on overall demand recovery

Outlook and recommendation

* The cement sector is entering its seasonally stronger period with relatively healthy demand indicators and improved pricing momentum. Infrastructure execution, housing activity and private-sector capex are expected to support demand recovery in H2FY27, although the pace of improvement could vary across regions. We believe margin recovery is likely to remain gradual, as elevated fuel costs and regional competitive intensity could continue to constrain spreads. Key risks include deficient and uneven rainfall, prolonged monsoon-related disruption, a temporary construction ban, and delays in infrastructure project execution, which could dampen cement demand momentum and weigh on volume growth in the near term.

* Companies with a well-diversified regional presence, higher operating leverage, and effective cost optimization initiatives, including increased use of renewable power, fuel mix optimization are relatively better positioned to navigate the current cost environment. We prefer UTCEM in the large-cap space, and JKCE and JSWC in the mid-cap space.

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