Tide turning?

For the past three years, cement industry has been at a demand standstill With domestic demand markedly falling each year since FY22, three critical factors have enabled the industry to keep afloat: growing exports, strong and persistent pricing power, and cost discipline.With June in the rear view, it is clear to see that the industry’s performance in FY25 has not deviated from a trend that has been well-established now.

For instance, in FY25, total sales grew 2 percent year on year, because of exports growth of 30 percent. Exports contributed 20 percent to the total sales mix which is considerably higher than previous years where domestic demand was flourishing. That cement manufacturers have found alternative markets for their quality and brand of cement has worked fairly well for industry players whenever domestic demand was weak. Over the past three years, exports contribution has grown from 10 percent to 16 percent to 20 percent—at it is still not currently at its peak.

Towards the end of FY22, the tide was turning on the economy and by the time, FY23 rolled in, the economy was well and truly in the trenches and domestic demand across industries has fizzled out. Real estate and construction sectors were considerably hit. While cement companies maintained profitability due to robust price increases, domestic demand was vanishing. In Fy23, domestic sales of cement bags fell 16 percent; and in subsequent years FY24 and FY25, domestic demand has slid 5 percent and 3 percent. The negative growth has eased.

Comparing the past five year performance, since FY21, prices have more than doubled (2.2x to be exact), and while capacities have grown by 22 percent, total sales shrank by 20 percent (domestic down 23%). A picture of health, it is not. But in many ways, FY26 may be the beginning of a fresh cycle for the industry. Though prices still remain robust, and coal costs are under control, domestic demand may return with increased development spending and incentives announced in the budget that could reviveconstruction activities, particularly in housing. At the same time, there are no indicators to suggest that exports may weaken in the coming months.Investment in alternative energy solutions and fuel sources has made the industry’s cost structure more resilient and less exposed to risk which has been paying dividends for industry players thus far. All these factors will help the industry return to previous glories, or at least grow close to them. For consumers though, nothing much is expected to change, least of all prices.