Cement offtake has entered a slow recovery periodas demand from the construction sector has resurfaced after a dull few years and an uneventful last year. In 2MFY26, the total offtake for cement has surged 21 percent, of which domestic cement demand grew 14 percent while exports—that are contributing 22 percent to the total offtake—grew 51 percent.
While domestic demand has improved, exports willthe real contributor to the win where cement manufacturers have turned to after poor demand scenarios playing out at home.
Total offtake in FY24 (during the first two months) were nearly the same as the start of this fiscal year, with one major difference—that year domestic offtake was 85 percent of total sales which has dropped to 78 percent in 2MFY26.
The year on year growth itself should be considered with caution. The fact that this year once again floods have ravaged the country wreaking havoc and wiping out significant infrastructure will affect infrastructure and construction demand in the months to come.
In the latter months however, demand will improve as reconstruction efforts take shape. In all this while, for cement manufacturers, if they keep running their plants, exports will come to the rescue balancing the scale to a degree.
Having said that, capacity utilization slid below 50 percentin FY25 despite exports chipping in 20 percent to the sales mix. Though they help cover fixed costs, they do fetch lower more competitive prices for cement manufacturers. They also incur higher distribution costs. For profitability, cement makers continue to rely heavily on a strong domestic pricing strategy even when exports help buff up the volumetric sales in periods of weak domestic demand.
In FY26, the government has budgeted a robust development program which works in favor of construction material manufacturers, though PSDP tends to be the first casualty when fiscal stability becomes precarious. Expectations are this year’s demand will bring back some of the volumetric glory of FY21 and FY22, though exports will continue to be at the forefront of said glory. How that affects cement makers’ profitability will depend on any price competition players may experience in the chase for domestic market share.
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