Cement Capacity Utilisation & Cyclicality

Suppose a factory could physically produce 690 units of something in a year but only actually makes about 480, running at roughly 70% of its physical capacity rather than near its maximum. That gap isn't inefficiency, in cement it's a structural feature of an industry whose demand rises and falls sharply with construction activity, government infrastructure spending cycles, monsoon seasons and housing market swings, none of which move in a smooth, predictable line.

India's installed cement capacity stood at roughly 690 million tonnes per year, while actual production reached about 453 million tonnes in FY2025, and industry forecasts expect utilisation to hold around 70 to 71% through FY27 even as major players keep adding capacity, precisely because producers deliberately build ahead of demand, capacity takes years to construct, so waiting until demand fully catches up before building would mean permanently lagging the market.

This is exactly why cement demand and pricing move in cycles rather than steadily, when construction activity accelerates, utilisation climbs toward the high 70s or 80s and pricing power strengthens, when it slows, utilisation drifts back down and price competition intensifies, a rhythm every major Indian cement producer's capital expenditure planning has to build around rather than assume away.

With top producers now planning roughly Rs 1,20,000 crore in capital expenditure between FY26 and FY28, nearly 50% higher than the prior three years, and 160-170 million tonnes of fresh grinding capacity expected over the same window, this cyclicality question becomes genuinely important to watch, that much new supply landing on a market still running at only 70% utilisation is a real test of whether India's construction demand growth can actually keep pace.