India cement sector outlook 2025: After consolidation and capacity expansion, what will be the demand trend?

During 2024, the cement sector faced operational challenges such as moderate capacity utilisation, lower sales realisation, slower volumes and a decline in margins. In 2025, the sector will look to overcome last year’s shortcoming and demand expectations are optimistic supported by increased government spending on infrastructure.

Consolidation in sector

The cement sector has undergone significant consolidation following a series of acquisitions, with the top five players now holding 62% of the market share, up from 45% in FY19. The entry of the Adani Group into the cement industry has intensified competition, particularly with Adani-led Ambuja Cement acquiring Sanghi Industries, Penna Cement, Orient Cement, and My Home. Additionally, its subsidiary, ACC, acquired Asian Concretes and Cements.

Aditya Birla-led UltraTech Cement has also been active, acquiring Kesoram and India Cements. Following these acquisitions and expansions, Adani Cement's total capacity has reached 100 MTPA, including 70 MTPA acquired from the Swiss firm Holcim. The company aims to further increase capacity to 140 MTPA by FY28. In comparison, UltraTech Cement currently operates at a capacity of 156.66 MTPA, with plans to expand to 200 MTPA by FY27.

Other players, such as JK Cement, are also eyeing growth, with plans to reach a capacity of 50 MTPA by FY30. However, after this wave of acquisitions, major players are expected to shift focus towards organic growth due to financial constraints. Ambuja Cement, following its recent acquisitions, has been left with minimal cash reserves, while UltraTech Cement is burdened by significant debt.

Capacity utilisation

Capacity utilisation is anticipated to improve in H1FY25. Clinker utilisation is projected to rise from approximately 75% in Q2FY25 to 81% and 98% in Q3 and Q4 of FY25, respectively. Historically, higher clinker utilisation in Q4 has supported industry pricing power. Further UltraTech is expected to maintain capacity utilisation above 80% over FY25-27, while Ambuja is expected to maintain above 75%.

Cement prices

During H1FY25 cement prices have hit a four-year low due to low demand and intense competition. However, prices are expected to rise in 2025 due to a rise in demand and reduced competitive intensity after consolidation in the industry which is anticipated to support a sustainable price increase. The price increase could have a magnified effect on the EBITDA of the top players which has remained range-bound in 2024.

Demand outlook

Cement demand is expected to increase, driven by government infrastructure spending, housing, and real estate. Government spending is crucial to drive cement demand and is expected to follow GDP growth in the coming years as government policy focuses on investment-led growth.

Margins

Fuel costs have been a significant factor influencing margins. While imported petcoke prices saw a recent increase, overall, fuel costs are expected to cushion margins for cement manufacturers in 2025. Companies are also focusing on cost-efficiency measures, including increasing green power usage and optimising logistics.

Conclusion

The Indian cement sector will witness an upcycle in 2025, driven by rising demand, reduced competition, and cost efficiencies. While regional presence and operational efficiencies remain key priorities for cement companies. Cement volumes are expected to recover in H2FY25, supported by increased rural consumption, a rebound in urban housing demand, and higher government infrastructure spending.

Industry consolidation is expected to strengthen pricing power, supporting price increases and Cement companies are focusing on improving efficiency, reducing costs, and increasing the use of green power. While some challenges remain, particularly in achieving desired profitability levels, the sector's outlook is optimistic.