CLSA sees H2 cement demand rising 6-8%; pricing may surprise in CY26

India’s cement sector could see a clear demand recovery in the second half of the year, with growth of 6-8%, and industry pricing may “surprise positively” in calendar year 2026, according to Indrajit Agarwal, Senior Research Analyst at CLSA, speaking at the CITIC CLSA India Forum 2025.Agarwal said cement demand weakened for five to six quarters due to elections, monsoons and softer consumer sentiment. But the September quarter was better than expected. “Demand was a tad better than our initial expectation,” he said, adding that companies also reported steady government capex trends.

With drier months ahead, Agarwal expects construction activity to pick up. “We have almost a six-month runway of relatively drier weather,” he said. He forecasts H2 demand growth between 6-8%, driven by large players who expanded capacity organically or through acquisitions.

Also Read | Cement prices hold despite weak Q2 volumes, says Pulkit Patni of Goldman SachsAgarwal noted that the cement industry structure has changed. About 10-11% of capacity has changed hands over three years, and the top five players now hold more than 80% market share in most regions. He said organic expansion supports more stable pricing, while inorganic expansion can weigh on it. Even so, he sees a favourable shift ahead. “Pricing could surprise positively as we head into CY26,” he said.

He added that monsoon-quarter pricing held up better than usual. “Generally, in a monsoon quarter we see 2-4% price correction; this time it was close to 1%,” he said.

On consolidation, Agarwal said a few assets are still up for sale, but they are already running at high utilisation. If acquired by existing large players, he does not expect major disruption. Any price improvement, he said, would directly boost profitability.

Steel sector outlook

Agarwal remains cautious on steel. China’s exports are set to exceed the 2015-16 peak of 100 million tonne, and India faces temporary over-capacity in flat steel. If safeguard duties are not extended, domestic prices may come under pressure. “We could see some pressure on steel prices heading into the next couple of months,” he said.

Also Read | Trade breakthrough could spark fresh FPI inflows into India, says Arvind Sanger

He is assuming a 5-6% price increase by the financial year 2026-27 (FY27); any shortfall could affect earnings estimates.

Consumer durables: Demand still soft

On consumer durables, Agarwal said categories linked to seasonal demand—such as air conditioners—remain weak. Cooler weather and higher inventories are delaying purchases. While tax cuts and lower lending rates help, he expects another soft quarter. He prefers diversified companies with exposure to late-cycle categories rather than firms dependent on one or two seasonal segments.

For the full interview, watch the accompanying video

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