Rising petcoke costs threaten cement makers’ profits despite stronger demand and government spending

Cement makers could see profit pressure in the second half of FY27 as petcoke prices jump to $187 a tonne, even though demand and prices improved in October 2026. Nuvama Institutional Equities kept a neutral view on the sector but kept JK Cement as its top pick with a Buy rating.

Demand and Pricing

Nuvama said cement demand rose month‑on‑month across most regions in October 2026 after the monsoon withdrew and the pre‑festive season began, but eastern India stayed weak because of lingering rain and festive disruptions. Manufacturers lifted trade‑segment prices by about ₹10‑15 per bag and non‑trade prices by ₹15‑20 per bag.

Government Spending

Overall government capital expenditure jumped roughly 40 % year‑on‑year in April‑August 2026, up from a 22 % rise in the same period a year earlier, with August alone seeing a 93 % surge. Central‑government outlay rose 64 % YoY in April‑August and nearly tripled in August. State spending grew about 11 % YoY in the April‑August window, slowing to around 4 % in August. CPSEs spent about ₹4.3 lakh crore in H1FY27, a 12 % rise YoY, though they fell 17 % in September.

Cost Pressures

The sharp rise in petcoke – a key fuel for cement kilns – adds roughly $39 per tonne quarter‑on‑quarter, driven by geopolitical tension in West Asia. Nuvama warned that the current price hikes may not fully offset this cost surge and that further cement price increases might be needed to protect margins.

Outlook

The sector’s performance will hinge on how quickly post‑monsoon demand recovers, whether price hikes keep pace with input costs, and the balance between infrastructure‑driven demand and a still‑soft housing market, which saw residential project launches fall 10 % YoY in April‑August 2026.

Context

Higher fuel costs can tighten profit margins for cement producers, while government infrastructure spending often boosts cement use. The housing slowdown offsets some of the gains from stronger public‑sector projects.