Cement Industry Poised for Growth in FY2026 Amid Demand Surge

Cement industry growth is projected at 6-7% in FY2026, driven by infrastructure and housing demands, according to ICRA. The sector expects major capacity expansions despite global economic challenges, maintaining a stable outlook. Capacity utilization is likely to remain constant at 70%, with signs of price recovery in late 2025.

The cement industry is forecasted to exhibit a growth of 6-7% in FY2026, bolstered by increasing demand from the housing and infrastructure sectors, as stated in an ICRA report. This projection follows a substantial 6.3% surge in cement volumes during FY2025.

ICRA foresees major capacity additions in the sector despite global economic uncertainties, predicting an increase to 43-45 million metric tons per annum (MTPA) in FY2026 from 32-35 million MTPA in FY2025. The agency maintains a stable outlook for the sector, underscoring confidence in its continued expansion.

Cement volumes during the first half of FY2025 grew modestly by 1.7% year-on-year, reaching approximately 212 million MT. This slow growth was influenced by factors such as India's General Elections, extended monsoons, and a wider slowdown in private sector investments.

The latter half of FY2025 witnessed a solid rebound, with volumes climbing by 10.7% year-on-year to roughly 241 million MT, driven by increased construction activity. Cement demand remains strong, prompting large manufacturers to scale up production capacities via organic and inorganic methods to secure their market positions.

Abhishek Lahoti, Assistant Vice President and Sector Head, Corporate Ratings at ICRA, noted, "With sustained demand, we anticipate the cement sector will add 43-45 million MTPA in FY2026, up from the estimated 32-35 million MTPA in FY2025." He highlighted that eastern and northern India are expected to spearhead the capacity additions, collectively contributing 22-24 million MTPA.

Despite an oversupply in the southern region, significant capacity expansion by major cement players is ongoing, as they aim to maintain optimal utilization levels and market presence. The industry's capacity utilization is projected to remain stable at 70% in FY2026, akin to FY2025's level.

Cement prices have shown signs of recovery from Q3 2025, following a 10% decline in average realization during the first half of FY2025. Despite lower realizations impacting profitability, reductions in coal and pet-coke costs provided interim relief to cement firms. "The credit profile of major and mid-sized cement companies is expected to stay stable, driven by healthy growth in operating income, anticipated margin improvements, and stable leverage metrics," Lahoti mentioned. However, smaller players might face pressures on their credit profiles due to squeezed profitability in the medium term, exacerbated by industry consolidation limiting pricing flexibility.

(With inputs from agencies.)