ICRA Forecasts 6-7% Growth in Cement Volumes for FY26 Driven by Robust Demand

Cement Industry Set for Growth in FY2026 Amidst Rising Demand

The cement sector is poised for a robust expansion of 6-7% in FY2026, according to insights from ICRA. This anticipated growth is primarily fueled by a rebound in demand stemming from the housing and infrastructure markets, following a favorable increase of 6.3% in FY2025. Despite facing global challenges, the cement industry’s capacity is expected to surge to 43-45 million MTPA in FY2026, a significant rise from 32-35 million MTPA in the previous fiscal year. ICRA maintains a positive outlook for the sector, signaling stability ahead.

Recent Trends in Cement Volumes

In the first half of FY2025, cement volumes experienced a modest uptick of 1.7% year-on-year, totaling approximately 212 million MT. This slow growth was mainly due to a dip in construction activities linked to the General Elections, extended monsoon rains, and a general slowdown in private capital expenditure. However, a notable turnaround occurred in the second half of FY2025, as cement volumes surged by 10.7%, reaching around 241 million MT, driven by a revitalization in construction projects.

Key Drivers of Growth:
- Increased demand from housing and infrastructure sectors.
- Expansion efforts by cement companies to boost production.

Capacity Expansion in the Cement Sector

Abhishek Lahoti, Assistant Vice President and Sector Head at ICRA, highlighted the optimistic forecast for capacity growth within the cement industry. “With strong demand indicators, we predict a capacity increase of 43-45 million MTPA in FY2026, up from 32-35 million MTPA in FY2025,” he stated.

During FY2026, ICRA’s analysis suggests that eastern and northern India will spearhead the capacity growth, contributing 22-24 million MTPA of new grinding capacity. Notably, the southern region, despite facing an oversupply, is witnessing significant expansions as major companies aim to capitalize on optimal utilization rates and sustain market presence. Lahoti added, “The overall industry capacity utilization is expected to hold steady at 70% in FY2026, consistent with FY2025, despite the expanded base.”

Recovery of Cement Prices

Cement prices are beginning to show signs of recovery, particularly from the third quarter of FY2025, following a 10% decline in average realization during the first half of the fiscal year. This price rebound is attributed to the uptick in demand, although reduced profitability in FY25 was impacted by lower realizations. Fortunately, a decline in coal and pet-coke prices—down 23% and 13% year-on-year, respectively—has offered some relief to cement manufacturers.

Outlook for Cement Producers:
- Stable credit profiles for larger and mid-sized companies.
- Expected improvements in operating income and margins.
- Smaller firms may face challenges due to reduced profitability and competitive pressures.

Lahoti concluded, “While the credit profiles of larger players are expected to remain stable due to healthy growth, smaller companies will likely experience pressure. The consolidation within the Indian cement industry has limited pricing flexibility for smaller or regional players, impacting their profitability in the medium term.”

The future looks promising for the cement industry as it adapts to changing market dynamics, aiming for sustained growth and profitability. For more insights into the latest developments in the cement market, consider exploring additional resources on industry forecasts and trends.