Indian cement firms' operating profitability is expected to decline by 10-15% in FY27 due to high power and fuel costs from West Asia tensions. The ICRA report suggests this will be partly offset by a 3-5% hike in cement prices.
The operating profitability of Indian cement companies is expected to moderate in 2026-27, primarily due to elevated power, fuel and selling costs linked to the ongoing geopolitical tensions in West Asia. According to a report by rating agency ICRA, the impact will be mitigated by a likely increase in cement prices.
"The OPBIDTA per tonne for ICRA's sample set of cement companies is projected to decline by 10-15% to Rs 820-870/MT in 2026-27, compared to estimates of Rs 950-980/MT in 2025-26," the report said.
Impact of Rising Power and Fuel Costs
ICRA noted that power and fuel, alongside selling costs, constitute 50-55 per cent of the total operating costs for cement manufacturers. The ongoing West Asia conflict raised global crude oil prices, increasing the costs of key inputs such as petcoke, diesel, and polypropylene for cement companies, which is likely to weigh on their operating profitability. The sector depends heavily on coal and petcoke for "clinkerisation and operating captive thermal power plants." Clinkerisation is the energy-intensive pyro-processing stage in cement manufacturing where raw materials (predominantly limestone and clay) are heated to extreme temperatures in a rotary kiln to form cement clinker.
Pricing Flexibility Constrained by Competition
"Pricing flexibility of the cement players continues to remain constrained due to intense competition. Cement prices are expected to increase by 3-5% in FY2027, following a marginal recovery of ~2% in FY2026. Industry players have initiated price hikes of Rs. 10-12 per bag in April 2026, 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," said Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA.
Crude and Petcoke Price Projections
ICRA also expects the crude price to average USD 95/bbl in 2026-27, in the baseline scenario, compared to approximately USD 72/bbl in 2025-26 owing to the West Asia conflict and the closure of the Strait of Hormuz. The report noted that these prices are likely to stay elevated if the war prolongs. Petcoke prices already rose sharply, with a 19% month-on-month increase in April 2026, and diesel prices went up by Rs. 3.9/litre in May 2026.
Analyst's Outlook on Costs and Mitigation
"The crude-linked cost pressure poses a key risk, particularly if geopolitical tensions persist. In 2026-27, 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." Reddy said.
Cement companies may absorb hiked input costs because of competitive market, but a part of it may also be passed on to customers.
"Overall, power and fuel costs are likely to increase by 10- 12%, while selling costs could rise by 6-8% in 2026-27, owing to higher freight and packaging expenses. The cement companies, however, are expected to mitigate a part of the impact through price pass-through, thereby cushioning the overall profitability," Reddy noted.
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