Subdued prices in Q3, volume strength to anchor cement sector outlook: Jyoti Gupta

Cement prices ended the December quarter on a softer footing compared to the previous quarter, but strong underlying demand and rising volumes continue to provide structural support to the sector, said Jyoti Gupta of Nirmal Bang Institutional. Channel checks indicate that while near-term realizations remain volatile due to capacity additions and cost pressures, the medium-term outlook is constructive as consolidation deepens and operating leverage improves.Commenting to ET Now on price developments, Gupta noted that “cement realizations in Q3 FY26 are subdued with prices down around 2% and could be slightly higher, sequentially in our coverage universe.” Profitability was impacted by several factors, including a 10% reduction in state tax credits and a sharp 24% increase in pet coke prices. These pressures were partially offset by operating leverage benefits that helped reduce freight, other costs and personnel costs per tonne.

Although coal prices fell by about 22%, the benefit remained limited as coal accounts for only about 35% of total fuel consumption at the pan-India level. As a result, Gupta expects EBITDA per tonne to decline by around ₹75 to ₹125 sequentially, depending on the fuel mix of individual companies.Early signs of price increases in the fourth quarter

On regional price trends, Gupta said price increases have become visible in the March quarter, especially in the non-trading segments. “There was around ₹35 to ₹40 across regions… in the south it was around ₹30 to ₹35, in the north…, broadly speaking, almost the entire region saw an increase of somewhere between ₹25 and almost ₹35-40,” she said, referring to the non-trading prices.

However, it may take longer for trading prices to reflect these increases. Festive demand around Makar Sankranti in the south and west could delay absorption, with clarity expected only after a week or more of deeper market penetration.

Despite the short-term volatility, Gupta emphasizes that the sector is firmly in a volume-driven cycle, with strong demand increasing capacity utilization and gradually improving cost structures. That said, large capacity additions in the sector are limiting pricing power, leaving near-term realizations volatile. It is expected that consolidation and economies of scale among top producers will eventually lead to better price discipline and more stable profitability.

Strong volume trajectory into the fourth quarter
Cement demand momentum remains healthy. Gupta highlighted that volume growth in the first quarter was around 11%, in the second quarter it was 7.4% and in the third quarter it is likely to be over 9%. For the fourth quarter of FY26, traditionally a seasonally strong quarter, it expects growth of 8 to 9%, driven by robust construction activity.

Major players such as Ambuja, UltraTech and JK Cement have led the volume growth, underscoring the continued consolidation of market share in favor of well-capitalized groups. UltraTech in particular is expected to remain the anchor of the sector, with volumes likely to exceed 35 million tonnes this quarter, while ACC and Ambuja see strong momentum post-integration.

Stock preferences and demand factors
Within the industry, Gupta’s preferences remain clear. Ambuja Cement is its top pick among the large caps, Ramco Cement in the mid-caps and Nuvoco in the small caps.

On demand trends, she pointed out that real estate activity in the luxury and ultra-luxury segments remains strong, while affordable housing growth is relatively muted. Infrastructure demand remains a key driver, with the South leading the way, followed by the Northern, Western, Eastern and Central regions. Defense-related investments and large, complex infrastructure projects are increasingly contributing to cement demand, especially in the south and north, while the northeast benefits from continued government spending.

Consolidation to reshape the industry
Even after recent mergers, Gupta believes UltraTech Cement will remain the market anchor given its pan-India presence, strong brand and large retail reach. As ACC and Ambuja strengthen their positions and gain market share, smaller players are likely to come under pressure.

She expects consolidation to accelerate further, with large, well-capitalized companies expanding through both organic capacity additions and acquisitions. In the long term, this should result in a more consolidated sector structure, improved price discipline and structurally stronger profitability.

While prices remain choppy in the short term, the long-term fundamentals of the cement sector remain intact, supported by strong volumes, consolidation-led efficiencies and sustained infrastructure demand.