The sudden spike in petrol and diesel prices will push up the operational cost and squeeze the profit margins of cement companies as they look for revival in demand to pass on the incremental costs.
The government hiked petrol and diesel four times in the past 10 days effecting a cumulative rise of ₹7.50 per litre since May 15. The ongoing war between the US and Iran has hit the supply of crude oil forcing the government to rise fuel prices.
Cement companies may be left to absorb major cost increase due to the intense competition in almost all the key regions. Despite revival in demand ahead of monsoon, the recent fresh capacity additions by leading players will make it difficult for cement producers to implement a price hike.
Cement companies have already undertaken price hikes of ₹10-20 per 50-kg bag in May on expectations of further fuel price hikes.
Ashutosh Murarka, Cement Analyst, Choice Institutional Equities, said the recent increase in fuel prices is expected to push up logistics cost by ₹60-90 a tonne.
This apart, the higher imported pet coke and coal prices, driven by geopolitical tensions and elevated crude prices, are likely to further inflate fuel costs and result in overall cost increase of ₹250-350 a tonne, depending on fuel mix, lead distance and transportation exposure, he said.
Companies with higher dependence on road logistics and imported fuel will witness a sharper cost escalation of ₹400-500 a tonne with major impact expected from the September quarter, given the stock of low-cost inventory available with companies, said Murarka.
Pressure on margins
Saurabh Jain, Head of Fundamental Research, SMC Global Securities, said the fuel price rise is expected to exert pressure on cement sector margins in the near term, as logistics, petcoke, coal, gypsum and packaging are key cost components for the industry. The cement producers’ ability to fully pass on incremental costs remains limited due to intense competition and ongoing capacity additions, particularly in South India, he said.
Going ahead, companies with better operational efficiencies, higher renewable energy usage, improved fuel mix, premiumisation strategies and logistics optimisation are relatively better placed to manage cost pressures, said Jain.
Manish Valecha, Co-Head of Research, Anand Rathi Institutional Equity, said the revival in demand in April has faded this month due to subdued sentiments driven by the ongoing West Asia conflict, delay in labourers’ return post-elections, intense heat, sand unavailability and poor agriculture output.
If the war escalates, government infrastructure spending is also expected to be impacted, as it will prioritise social welfare expenditure over infrastructure, he said.
Cement companies’ price hike attempts in May could not sustain due to weak sentiments, but they will continue to attempt as the upcoming monsoon will dampen demand further, limiting the scope for large price increases, said Valecha.
Published on May 26, 2026