Cement Prices Surge as Fuel and Gypsum Costs Escalate in India

Cement prices in India have surged significantly this fiscal year, driven by rising input fuel costs, particularly petroleum coke (petcoke), according to industry sources. By May 2025, the average price of cement across India had climbed to Rs 360 per 50-kg bag, marking an 8% increase compared to the previous year. This rise follows a steep decline in prices the year before.

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Regional variations in cement prices are evident, with eastern India experiencing the most significant hikes. In West Bengal, prices rose by Rs 20 per bag, while western markets saw a modest increase of Rs 3. Despite these differences, the overall trend across the country is upward. The latest all-India data available is from May.

Fuel Costs and Import Challenges

The primary factor driving up cement prices is the cost of fuel, especially petcoke, which accounts for over half of the industry's fuel mix. International petcoke prices in the spot market have jumped by 17%. Indian cement producers typically import 12-14 million tonnes of petcoke annually, mainly from the USA (60%) and Saudi Arabia (25%).

This reliance on imports has added Rs 75 per tonne to production costs for Indian cement makers—Rs 60 from price increases and Rs 15 due to rupee depreciation. Fuel and power generally make up 30-35% of total production costs, so such spikes directly impact profitability.

Impact on Cement Producers

Companies like Shree Cement and JK Cement are particularly affected as they depend on petcoke for 70-95% of their energy needs. Even with some relief from lower coal prices, the sector faces renewed cost pressures. Global petcoke prices have reached nearly USD 115 per tonne, their highest in four months.

The challenge for Indian cement producers is compounded by the rupee's weaker performance—it has depreciated by 2-3% against the dollar recently, making imports more expensive. With petcoke forming a significant part of their fuel basket, this double blow is increasing production costs per tonne.

Gypsum and Competitive Pricing

Gypsum is another critical component in cement production, affecting quality and performance parameters like workability and setting time. Its prices have risen due to high import dependence, international sanctions, restrictions, and declining purity of Rajasthan reserves along with scarcity in J&K mineral gypsum.

Despite recent price hikes, India's cement prices at USD 92 per tonne remain competitive globally compared to USD 90-100 in Bangladesh, USD 140 in the USA, and USD 229 a tonne in Germany. China has a lower price of USD 54 per tonne due to oversupply and property slowdown.

Demand and Future Outlook

India's per capita cement consumption stands at 280-330 kg, far below China's 1,400-1,500 kg and Turkey's 730-780 kg, indicating significant growth potential. This demand runway combined with competitive pricing ensures India's global standing remains strong despite rising costs.

Analysts predict operating margins will improve by 80-150 basis points in FY26 to reach 16.5-17%, assuming stable prices and moderated fuel costs. While GST reform reducing the slab from 28% to 18% may slightly ease tax burdens, it does little to counteract fuel and gypsum shocks.

"The knock-on effect on cement prices is inevitable until more high-grade domestic fuel alternatives are developed," said Subhasri Chaudhuri, Secretary General of the Coal Consumers Association of India.

For cement producers, fuel and gypsum remain crucial factors influencing price stability. As long as these costs stay elevated, cement prices in India are expected to remain firm or even rise further through FY2026.

With inputs from PTI