West Asia crisis to take a toll on cement sector profitability: ICRA
Operating profitability in the sector to moderate, but the impact will be mitigated by the likely increase in prices, rating agency says
- May 20, 2026,
- Updated May 20, 2026 3:47 PM IST
The operating profitability of Indian cement companies to moderate in financial year 2026-27 (FY27), primarily due to elevated power and fuel prices, and selling costs linked to the ongoing geopolitical tensions in West Asia, according to rating agency ICRA. However, the impact will be mitigated by the likely increase in prices, it said.
It has estimated that the operating profit of key cement companies could decline by 10-15% to Rs 820-870 per million tonne in FY27, compared to around Rs 950-980 per MT in FY26.
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Power, fuel, and selling costs constitute 50-55% of the total operating costs for cement companies. The ongoing conflict in West Asia has raised global crude oil prices, increasing the costs of key inputs such as petcoke, diesel and polypropylene for cement companies. This is expected to weigh on their operating profitability. Overall, power and fuel costs are likely to increase by 10-12%, while selling costs could rise by 6-8%, owing to higher freight and packaging expenses.
Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said: “The crude-linked cost pressure poses a key risk, particularly if geopolitical tensions persist. In FY27, power and fuel costs are set to rise, driven by the uptick in petcoke prices, tightening fuel markets and likely rise in coal prices. Additionally, higher logistics costs and a depreciating rupee are expected to increase the landed cost of fuel.”
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The sector is highly dependent on coal/petcoke for clinkerisation and operating captive thermal power plants, reflecting its energy-intensive nature. From a distribution perspective, cement companies mainly rely on road networks for transportation to end customers as well as for the movement of raw materials to manufacturing facilities.
However, the companies’ pricing flexibility is constrained due to intense competition. “Industry players initiated price hikes of Rs 10-12 per bag in April, although the extent of cost pass-through remains contingent on demand-supply dynamics. Despite cost pressure, the sector’s credit profile remains stable and debt protection metrics are likely to remain comfortable,” Reddy added.
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The operating profitability of Indian cement companies to moderate in financial year 2026-27 (FY27), primarily due to elevated power and fuel prices, and selling costs linked to the ongoing geopolitical tensions in West Asia, according to rating agency ICRA. However, the impact will be mitigated by the likely increase in prices, it said.
It has estimated that the operating profit of key cement companies could decline by 10-15% to Rs 820-870 per million tonne in FY27, compared to around Rs 950-980 per MT in FY26.
MUST READ: India’s R&D expenditure low at 0.6-0.7% of GDP, should be raised to 2%: CareEdge
Power, fuel, and selling costs constitute 50-55% of the total operating costs for cement companies. The ongoing conflict in West Asia has raised global crude oil prices, increasing the costs of key inputs such as petcoke, diesel and polypropylene for cement companies. This is expected to weigh on their operating profitability. Overall, power and fuel costs are likely to increase by 10-12%, while selling costs could rise by 6-8%, owing to higher freight and packaging expenses.
Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said: “The crude-linked cost pressure poses a key risk, particularly if geopolitical tensions persist. In FY27, power and fuel costs are set to rise, driven by the uptick in petcoke prices, tightening fuel markets and likely rise in coal prices. Additionally, higher logistics costs and a depreciating rupee are expected to increase the landed cost of fuel.”
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The sector is highly dependent on coal/petcoke for clinkerisation and operating captive thermal power plants, reflecting its energy-intensive nature. From a distribution perspective, cement companies mainly rely on road networks for transportation to end customers as well as for the movement of raw materials to manufacturing facilities.
However, the companies’ pricing flexibility is constrained due to intense competition. “Industry players initiated price hikes of Rs 10-12 per bag in April, although the extent of cost pass-through remains contingent on demand-supply dynamics. Despite cost pressure, the sector’s credit profile remains stable and debt protection metrics are likely to remain comfortable,” Reddy added.
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