As Sri Lanka’s domestic cement market’s import mix has shifted towards a roughly 69% dependency on India for clinker since 2022, when the nation had faced FX constraints, the sector now faces risks related to a limited supplier base and currency volatility, according to LOLC Securities’ Construction and Material sector outlook report for March 2026.
“The import mix has shifted notably towards India in 2024, reflecting cost optimisation and supply chain realignment amid FX constraints. [An] increased concentration of imports highlights elevated dependency on a limited supplier base, exposing the sector to pricing power, currency volatility, and external supply risks,” the report said, detailing the overall dependency change in the main sourcing countries.
“This dynamic reinforces the FX-sensitive nature of cement availability and pricing,” the report added, “with import conditions remaining a key determinant of margin stability across construction-linked players.”
Despite the shift in import sources, the report detailed a simultaneous trend towards domestic production. “Sri Lanka’s cement market reflects a structural shift toward greater domestic supply, with local production now accounting for a dominant share (85%) of total demand,” according to the document. “The decline in import reliance, alongside the expansion in domestic output, suggests improved capacity utilisation and a more self-sufficient supply base within the industry.”
On the subject of pricing, the report found that cement pricing continues to be closely linked to exchange rate movements, however this time around, more so on Indian currency, particularly for clinker imports.
While “stabilisation in the exchange rate has helped contain cement price volatility,” the report warned that “emerging macroeconomic pressures pose a risk of renewed rupee depreciation, which could drive input cost increases and place upward pressure on cement prices, potentially constraining demand recovery.”
The report also describes a strategic response from cement producers. “The increasing reliance on cost-competitive clinker imports, particularly from regional suppliers, reflects a strategic shift by cement producers to optimise sourcing and manage input costs as construction activity gradually recovers,” report stated.