Cement prices in the domestic market may go up by Rs 25-50 per bag this month as manufacturers have started to pass on the rising costs due to the Russia-Ukraine war, Crisil said in a report.

"After rising to Rs 390 per bag over the past 12 months, domestic cement prices are set to climb another Rs 25-Rs50 across regions in April as manufacturers start to pass on rising costs due to the Russia-Ukraine conflict," the report said.

Crude oil prices rose to an average USD 115 per barrel in March, it said. Besides, international coal prices have also increased due to various factors, including the Russia-Ukraine conflict, weather disruptions in the key mining areas of Australia and Indonesia's ban on coal exports to meet domestic demand, it added.

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"The resultant surge in power and fuel costs, in turn, has raised the cost of road freight, which accounts for 50 percent of cement transport. Bulk use diesel prices have been hiked by Rs 25 per litre, while retail diesel prices have been increased 14 times since mid-March, taking the total increase to Rs 10 per litre," it said.

According to Crisil Research Director Hetal Gandhi, cement demand increased by 20 percent year-on-year in the first half of FY22 but experienced an unexpected slowdown in the second half due to unseasonal rains, sand issues and labour unavailability.

"In the 2023 fiscal, cement volume growth will be stable at 5-7 percent, driven by affordable housing demand from tier-2 and tier-3 cities, along with infrastructure. However, high construction costs will limit the demand uptick," he said.

Volumes have picked up across regions, though actual demand trends remain monitorable as an escalation in construction cost is expected to weigh particularly on cement demand in the cost-sensitive rural housing segment. For the record, housing accounts for nearly 60 percent of cement demand.

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