PL Capital on Cement: Weather Turns the Tide on Demand, Price Momentum Softens

Mumbai | June 3 –  A bag of cement in India cost ₹365 on average by May-end, up ₹5 from April. But the price uptick, like the summer spike in temperature, may not last.

PL Capital’s latest monthly dealer channel checks show that while prices moved up in May across North, South, and East India—driven by pre-monsoon buying and earlier cost pressures—demand is now tapering off. The early arrival of the monsoon, combined with April’s relentless heatwave, has significantly disrupted construction activity in both government and private sectors.

This is particularly visible in Northern India. Prices in Delhi rose by ₹10 per bag in May. Yet labor availability has been constrained since April-end, with heat forcing a pause in activity. Dealers told PL Capital that uncertainty looms on when the workforce will return in numbers. Demand, predictably, remains soft.

“We’ve not seen consistent site activity since April-end,” a dealer in North India said in the PL Capital report. “Laborers left due to the heat, and now the rains are making it worse.”

In the Central region, particularly Lucknow, cement prices actually declined ₹5 per bag, underscoring how weather can quickly reverse pricing dynamics. Trade sales dropped 10–15% month-on-month, according to local feedback.

Meanwhile, Southern India saw the sharpest price rise—₹15 per bag in Chennai—as dealers tried to push through hikes before monsoon-related dampening set in. But not all regions fared equally. In Hyderabad, prices remained flat, and some dealers even anticipate a rollback of ₹10 per bag in June due to weak government-led construction.

Even where prices increased, demand hasn’t necessarily kept pace. In Kolkata, dealers reported just a ₹3/bag uptick, with no visible improvement in volumes. A similar story played out in Patna—where a ₹10/bag hike was announced, followed by another ₹20/bag in early June. But demand remains tepid, stuck between marriage season logistics and the unpredictability of the rains.

Why prices went up

The modest nationwide increase in prices—averaging ₹5/bag—wasn’t purely demand-driven. Dealers attribute part of it to a short-term uptick in pet coke prices, which are now receding as global crude corrects. That means the underlying cost push that gave companies cover to raise prices in May may no longer hold in June.

From the data, PL Capital sees the May hike more as opportunistic than structural.

The forward lens: what to watch

1. 1. Flat to declining prices in June:
      Most dealers surveyed expect price action to stall or reverse in June due to weak demand and early rains.
   2. Government projects slowing down:
      Infra-led demand has taken a hit, especially in Western and Central India, where execution has been paused or deferred.
   3. IHB activity to offer limited support:
      The individual home builder segment may provide some floor support in interior regions, but not enough to offset broader softness.
   4. Capacities coming online:
      ~60mtpa of cement capacity is expected to be added over the next 12–18 months. How the market absorbs this, especially in a weak macro backdrop, will be critical.
   5. Pet coke correction could curb further hikes:
      The cost element that aided May’s price rise is easing. That puts more weight on volume recovery for any pricing support.

Where to stay invested

In a fragmented industry facing cyclical and seasonal stress, scale and cost leadership matter. PL Capital’s top picks:

• UltraTech Cement (CMP: ₹11,195 | TP: ₹13,668 | Buy) — largest player, best-in-class operations
• Ambuja Cement (CMP: ₹556 | TP: ₹658 | Buy) — strong balance sheet, steady volume prospects

Bottom line:

India’s cement market has entered a seasonally weak phase, worsened by climate-related disruptions. While May saw price gains, they are unlikely to sustain without demand support. Sector leaders, with operating leverage and cost controls, are best positioned to navigate the turbulence.

Read The Full Report Here.