India cement margins seen slipping 150-200 bps in FY27 on higher energy costs: Crisil

Indian cement makers' operating profitability is expected to weaken in fiscal year 27 (April-March), with margins seen falling 150-200 basis points year over year to 16%-18% as higher energy costs feed through to producers' cost base, Crisil Intelligence said April 13.

The margin compression would follow an expansion of 260-280 bps in FY26 to 18%-20%, Crisil, part of S&P Global, said.

Power and fuel, which make 26%-28% of total cost, are expected to rise 10%-12% year on year in FY27, driven by higher crude and petcoke prices amid the West Asia conflict, the report said.

"Geopolitical disruptions will intensify cost pressures for cement makers in the first half this fiscal," Sehul Bhatt, director at Crisil Intelligence, said, adding that a surge in energy prices and moderate increases in raw material and freight costs would lift total costs 4%-6%.

Limited room for price-led recovery

Cement producers are expected to increase prices 1%-3% year over year to Rupees 355-360/bag in FY27, with new capacity additions and heightened competition likely to limit further gains.

With steady demand growth and a modest price uptick, the agency expects cement realizations to improve 2%-4% in FY27, offering "some respite," said Kinjal Shah, manager at Crisil Intelligence.

Cement demand is projected to rise 6.5%-7.5% in FY27, led by the infrastructure, industrial, and commercial segments, Crisil said.

Crude, petcoke, coal, diesel in focus

Crisil said Brent crude averaged about $104/b in March, up 46% month over month, and was up 26% sequentially in the previous fiscal's fourth quarter.

For FY27, it expects Brent to remain elevated and volatile, averaging $82-$87/b, up 21%-23% year over year.

International petcoke prices, which were up 13% sequentially in the previous fiscal's fourth quarter, are also expected to rise, Crisil said.

International thermal coal prices rose about 8% year over year in the last quarter, and are expected to be rangebound at $80-$85/mt with an upside bias, assuming easing of the West Asian conflict and seaborne traffic normalization, Crisil added.

Industrial diesel prices increased about 25% in March, which could have knock-on effects for raw material procurement costs, even as retail diesel prices remained steady.

Platts, part of S&P Global Energy, assessed cement clinker FOB Turkey at $46.5/mt on April 9, down 50 cents/mt week over week.