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2026-05-23

Fuel and Freight Costs Are Rising Together: Why Cement Producers Are Turning to SCM Strategy

Indian and Asian cement producers face a 10-12% increase in power and fuel costs and 6-8% higher selling costs in 2026-27. With crude prices elevated and freight rates firm, the industry is under margin pressure. Supplementary cementitious materials are becoming a structural lever to cut both cost and clinker dependence.

Industrial cement plant with rising energy cost indicators and bulk logistics scene
Key insight
Indian and Asian cement producers face a 10-12% increase in power and fuel costs and 6-8% higher selling costs in 2026-27. With crude prices elevated and freight rates firm, the industry is under margin pressure. Supplementary cementitious materials are becoming a structural lever to cut both cost and clinker dependence.

The cement sector in India and across Asia is entering a cost squeeze that looks less like a temporary cycle and more like a sustained operating environment. According to recent industry assessments, power and fuel costs are projected to rise 10-12% in the 2026-27 period, while selling expenses — driven by higher freight and packaging outlays — could climb another 6-8%. Add to that the ongoing West Asia conflict, which has pushed crude prices higher and injected further uncertainty into energy and logistics markets, and the sector faces what analysts are calling a 'perfect storm' for margins.

Cement plant energy infrastructure and dry bulk freight logistics scene
Rising energy and freight costs are reshaping how cement producers think about raw material strategy.

1. The cost stack is under pressure from every direction

Cement manufacturing is inherently energy-intensive. Kiln operations depend on petcoke, thermal coal, and coking coal, all of which have seen above-normal price increases. The fuel price revision triggered by the West Asia conflict is expected to escalate costs further, intensifying pressure on companies already grappling with elevated raw material prices. In response, Indian producers initiated price hikes of Rs 10-12 per bag in April 2026. But the extent of cost pass-through remains contingent on demand-supply dynamics, and in competitive markets not every producer has the pricing power to recover the full increase. For export-oriented or import-dependent markets, the calculus is even harder.

Close-up of supplementary cementitious materials including slag and fly ash
SCMs such as GBFS and fly ash offer a lower-energy pathway to cement performance without relying solely on clinker.

2. SCM is moving from sustainability option to cost-control necessity

For years, supplementary cementitious materials have been promoted primarily for their carbon-reduction credentials. Slag, fly ash, and pozzolans lower the clinker factor in cement, which directly reduces both CO2 emissions and thermal energy consumption per tonne of finished product. In a normal cost environment, that was a welcome bonus. In the current environment, it is becoming a financial necessity. Every percentage point of clinker replaced by ground granulated blast furnace slag (GGBFS) or quality fly ash removes a corresponding share of kiln fuel demand from the cost base. As energy prices stay elevated, the economic case for SCM substitution strengthens regardless of green-building mandates or carbon regulations.

Dry bulk port terminal loading supplementary cementitious materials for export
For importing markets, securing reliable SCM supply chains is becoming as strategic as fuel procurement.

3. What this means for international material suppliers

The cost pressure on cement producers translates into demand-side opportunity for suppliers of consistent, bulk-quality SCM. Markets that previously viewed GBFS or fly ash as niche alternatives are now recalculating their procurement priorities. The growing global GGBFS market — projected to expand from USD 20.7 billion in 2024 to USD 36.0 billion by 2034 — is not only a sustainability story; it is a cost-management story. For producers in China, India, and Southeast Asia with access to stable blast-furnace slag or quality fly ash, the current margin squeeze in finished cement means their customers have both the incentive and the urgency to increase SCM blending ratios. The question is no longer whether to substitute clinker, but how quickly the supply chain can scale to meet that substitution demand.

The near-term cost shock may fade, but the structural shift it accelerates will not. Cement producers that integrate SCM strategy into their core procurement and product planning will be better positioned regardless of where fuel and freight prices settle. For suppliers, this is a clear signal: reliability, consistency, and bulk availability are the currencies that matter now.