West Asia conflict to squeeze Indian cement margins 10-15% in 2026-27
Synopsis
ICRA's latest report puts a number on the West Asia conflict's collateral damage in India: cement-sector operating profit per tonne could fall up to 15% in 2026-27 as crude averages $95 a barrel, inflating petcoke, diesel, and logistics costs. Price hikes of ₹10-12 per bag have begun, but whether they stick depends on demand — and on how long the conflict lasts.
Key Takeaways
ICRA projects Indian cement sector OPBIDTA per tonne to fall 10–15% to ₹820–870 in 2026-27, from ₹950–980 in 2025-26.
The West Asia conflict is driving up crude oil, petcoke, diesel, and polypropylene costs for cement manufacturers.
ICRA's baseline assumes crude oil averaging $95 per barrel in 2026-27, up from ~$72 per barrel in 2025-26.
Power, fuel, and selling costs account for 50–55% of total operating costs; power and fuel costs alone may rise 10–12% .
Industry has initiated cement price hikes of ₹10–12 per bag in April 2026 to partially offset cost pressure.
Despite margin pressure, the sector's credit profile remains stable with debt protection metrics expected to stay comfortable.
Operating profitability for Indian cement companies is set to come under pressure in 2026-27, as rising power, fuel, and logistics costs — driven in part by the ongoing West Asia conflict — erode sector margins, according to a report released on Wednesday, 20 May 2026. The findings, published by ratings agency ICRA, flag geopolitical risk as a key variable for one of India's most capital-intensive industries.
Margin Compression in Focus
ICRA projects the OPBIDTA per tonne for its sample set of cement companies to ease by 10–15 per cent, falling to ₹820–870 per metric tonne in 2026-27 from an estimated ₹950–980 per metric tonne in 2025-26. The agency attributes the squeeze to a confluence of crude-linked input cost inflation and elevated freight expenses — factors largely outside the sector's direct control.
Power, fuel, and selling costs together account for 50–55 per cent of total operating costs for cement manufacturers, making them acutely sensitive to energy price swings. Overall, power and fuel costs are projected to rise by 10–12 per cent, while selling costs could climb 6–8 per cent in 2026-27 on account of higher freight and packaging expenses.
The West Asia Factor
The prolonged conflict in West Asia has pushed global crude oil prices higher, inflating the cost of key inputs including petcoke, diesel, and polypropylene. ICRA has pegged crude oil at an average of $95 per barrel in its 2026-27 baseline scenario, a sharp rise from approximately $72 per barrel in 2025-26. A depreciating rupee further compounds the burden by raising the landed cost of imported fuel.
Anupama Reddy, Vice President and co-group head of corporate ratings at ICRA, said: 'The crude-linked cost pressure poses a key risk, particularly if geopolitical tensions persist. In 2026-27, power and fuel costs are set to rise, driven by the uptick in petcoke prices, tightening fuel markets and likely rise in coal prices.'
Price Hikes and Demand Dynamics
Cement prices are expected to increase by 3–5 per cent in FY2027, following a modest recovery of roughly 2 per cent in FY26. Industry players have already initiated price hikes of ₹10–12 per bag in April 2026, though ICRA noted that the extent of cost pass-through remains contingent on prevailing demand-supply dynamics. Companies are expected to partially offset margin pressure through these price adjustments, cushioning the overall profitability impact.
Credit Profile Stays Stable
Despite the margin headwinds, ICRA assessed the sector's credit profile as stable, with debt protection metrics likely to remain comfortable. This suggests that while operating earnings will moderate, balance sheet stress is not anticipated in the near term — a reassurance for lenders and investors tracking the sector.
How sustained the West Asia conflict remains, and whether crude stabilises below ICRA's $95 baseline, will be critical determinants of whether the sector's actual margin outcome lands at the better or worse end of the projected range.
Point of View
But its success depends on construction demand holding up, which itself depends on government capex momentum and monsoon-linked rural activity. What the report does not fully address is the structural exposure: Indian cement companies have historically under-invested in alternative fuel transitions, leaving them disproportionately vulnerable every time crude spikes. If the conflict extends through FY27, the $95 crude assumption could prove conservative, and the lower end of the margin band — ₹820 per tonne — may become the ceiling rather than the floor.
NationPress
12 Aug 2026
Frequently Asked Questions
Why are Indian cement company margins expected to fall in 2026-27?
ICRA projects a 10–15% decline in operating profitability per tonne for Indian cement companies in 2026-27, primarily due to rising power, fuel, and logistics costs linked to the West Asia conflict and higher global crude oil prices. Petcoke, diesel, and polypropylene costs are all expected to increase as a result.
What is ICRA's crude oil price assumption for 2026-27?
ICRA's baseline scenario assumes crude oil will average $95 per barrel in 2026-27, compared to approximately $72 per barrel in 2025-26. This sharp increase underpins the agency's forecast for higher fuel and input costs across the cement sector.
Have cement companies already started raising prices?
Yes. Industry players initiated price hikes of ₹10–12 per bag in April 2026 to partially pass on rising costs to consumers. Cement prices are expected to increase by 3–5% in FY2027, following a modest 2% recovery in FY26, though the full pass-through depends on demand-supply conditions.
Is the credit profile of Indian cement companies at risk?
No. Despite margin pressure, ICRA assessed the sector's overall credit profile as stable, with debt protection metrics expected to remain comfortable. The profitability moderation is not seen translating into balance sheet stress in the near term.
Which cost components are most affected for cement manufacturers?
Power, fuel, and selling costs — which together make up 50–55% of total operating costs — are the most exposed. Power and fuel costs are projected to rise 10–12%, while selling costs could increase 6–8% in 2026-27 due to higher freight and packaging expenses.
