In the quiet arithmetic that links distant oil markets to the kilns of India's cement makers, a Systematix Group report, released from New Delhi on November 12, suggests that relief is coming but not yet arrived. Falling crude prices should eventually ease the cost of petcoke and coal, the fuels the industry depends on most, though the benefit will travel slowly. For now, the producers who held volumes steady and won better prices in the second quarter must carry fuel and packaging costs a while longer, with the real test awaiting the second half of the fiscal year.
Cement Makers Eye Margin Relief as Falling Oil Prices Ease Fuel Costs in H2 FY27
In the quiet arithmetic that links distant oil markets to the kilns of India's cement makers, a Systematix Group report, released from New Delhi on November 12, suggests that relief is coming but not yet arrived. Falling crude prices should eventually ease the cost of petcoke and coal, the fuels the industry depends on most, though the benefit will travel slowly. For now, the producers who held volumes steady and won better prices in the second quarter must carry fuel and packaging costs a while longer, with the real test awaiting the second half of the fiscal year.
Cement makers in India are being told to brace for a fuller margin recovery later in the financial year, and the cause starts far from the factory floor, in global oil markets. A Systematix Group report, circulated from New Delhi on November 12, argues that the sharp recent fall in oil prices should eventually bring down the cost of petcoke and coal, the fuels that power most of the industry's kilns.
The relief, however, is still a forecast. Systematix expects fuel prices to follow crude lower, but only with a delay, so producers will not see the benefit at once. Fuel and packaging costs are likely to keep weighing on profitability in the third quarter of FY27, and the real improvement is expected to arrive in the second half.
The outlook is built on a second quarter that the brokerage calls resilient. Volumes across the companies it covers rose 7.2 per cent year-on-year, driven by higher sales and better realisations, meaning firmer prices per unit. Systematix expects those higher prices to keep supporting earnings as input costs ease.
The report is an analyst's view, not a reported result, and it leans on several things going right together: oil staying low, fuel prices following, and cement prices holding. The source gives no fuel price levels, margin figures, or company names, so the scale of any gain remains unmeasured. The clearest signal to watch is the third quarter, which should show whether the lag is real and whether the expected second-half recovery begins to take hold.
Cement makers in India are being told to expect better margins in the back half of the financial year, and the reason sits well upstream of the kiln: the price of oil. A report from Systematix Group, circulated on November 12 from New Delhi, argues that the recent sharp decline in global oil prices should eventually pull down the cost of petcoke and coal, the two fuels the industry leans on most heavily.
The timing matters because the report is not describing a recovery that has already happened. It is describing one the brokerage expects. Systematix says the relief will not arrive all at once. In its words, petcoke and coal prices are expected to follow oil lower, but with a delay. The transmission from crude to industrial fuels is gradual, and cement producers will feel it on their income statements only as it works through.
That lag shapes the near-term picture. The report expects fuel and packaging costs to remain a concern for cement manufacturers and to weigh on profitability in the third quarter of FY27. In other words, the pressure that companies have been absorbing is likely to persist for a while longer before the benefit of cheaper fuel shows up. The improvement the brokerage anticipates is concentrated in the second half of the fiscal year.
The forecast rests on a quarter that Systematix describes as resilient. In the second quarter of FY27, volumes across the companies the brokerage covers grew 7.2 per cent year-on-year. The report credits both higher sales volumes and improved realisations, meaning better prices per unit, for the growth in top-line revenue. Demand was holding up, and producers were also getting more for what they sold.
That second point carries weight in the outlook. Systematix expects higher cement prices to continue supporting earnings alongside the easing in fuel costs. The two forces point in the same direction: firmer pricing on the revenue side and, eventually, lower input costs on the expense side. Together they form the basis for the report's expectation of a significant improvement in profitability.
The report is an analyst view rather than a reported result, and its central claim depends on a chain of events: oil staying lower, petcoke and coal following, and cement prices holding. The source material does not give specific price levels for fuels, margin figures, or names of individual companies, so the size of the expected gain is not quantified here.
What to watch is the third quarter. If fuel and packaging costs weigh on results as Systematix expects, that will confirm the lag it describes. The test of the thesis will then come in the second half, when the delayed drop in petcoke and coal prices is supposed to begin showing up in margins.
Notable Quotes
As oil prices fell sharply in recent weeks, we expect petcoke and coal prices to follow suit with a delay.— Systematix Group report
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