CEMENT INDUSTRY

Nidhi RaghavShrinath

INTRODUCTION . India's cement production has increased at a compound annual

growth rate (CAGR) of 9.7 per cent to reach 272 million tonnes (MT) during FY 06-13.

India is the second largest producer of cement in the world with a current capacity of around 370 MT which is expected to grow to 550 MT by FY 2013.

OPPORTUNITIES Foreign companies are looking for investing in the Indian cement

industry to cash in on the opportunities in this market. Example: - Holcim Ltd and Lafarge SA Notable infrastructural projects already coming up in the country. Example: - Indian engineers are working in the

Himalayas to build the world's highest railway bridge which is expected to be 35 meters taller than the Eiffel Tower when completed in 2016.

MARKET SIZE . The housing sector is the biggest demand driver of cement,

accounting for about 67 per cent of the total consumption. Other major consumers of cement include infrastructure at 13

per cent, commercial construction at 11 per cent and industrial construction at 9 per cent.

The cement industry in India is divided into five regions, viz, north, south, west, east and the central region.

The southern region of India has the highest installed capacity, accounting for about one-third of the country's total installed cement capacity.

Demand set to increase at a CAGR of more than 8 per cent during FY 14-16, as per 'Indian Cement Industry Outlook 2016'.

INVESTMENTS

Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted foreign direct investment (FDI) worth Rs 13,546.47 crore (US$ 2.23 billion) between April 2000 and June 2014.

India Cements Ltd plans to merge with its subsidiary Trinetra Cements Ltd.

Ambuja Cement, part of the Holcim Group, plans to invest Rs 802 crore (US$ 132.57 million) in 2014 in various ongoing projects.

CONTD. Dalmia Bharat Group Foundation (DBGF) has partnered with

New and Renewable Energy Development Corporation of Andhra Pradesh, Limited (NREDCAP) - a State Government Company, for the promotion of biogas plants in Kadapa district.

WORLD WIDE LEADERS

1 Anhui Conch China 217Metric tonne 26 Plants

2 Lafarge France 205 134

3 Holcim Switzerland 174 117

GOVERNMENT INITIATIVES The Government of India's keen focus on the development of

infrastructure in the country has given a big boost to the cement industry in India.

In its 12th Five Year Plan, the government plans to increase investment in infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to 150 MT.

The government incorporated the Cement Corporation of India (CCI) in 1965 to achieve self-sufficiency in cement production in the country.

GOVERNMENT INITIATIVES (CONTI….)

Currently, CCI has 10 units spread over eight states in India. In order to help the private sector companies thrive in the industry,

the government has been approving their investment schemes. Ambuja Cements Ltd's Concrete Futures Laboratory (CFL) has

received accreditation for tests in concrete from National Accreditation Board for Testing and Calibration Laboratories (NABL) under the Department of Science & Technology, Government of India.

The company received accreditation for 13 tests.

ROAD AHEAD The Indian cement industry, being the second largest in the world,

is globally competitive. With the Government of India providing enough scope in

infrastructure development, there is a lot of hope for the cement sector.

Following the release of the Union Budget in July 2014, cement companies are hoping for some reforms like reduction in excise duties, which will go a long way in the betterment of this sector.

ROAD AHEAD (CONTI….) In addition, with the ever-increasing industrial activities, real

estate, construction and infrastructure, and with the Special Economic Zones (SEZs) being developed across the country, the demand for cement in India is slated to increase in the upcoming years.

TRENDS The Indian cement industry is the 2nd largest market after China

accounting for about 8% of the total global production. It had a total capacity of about 347 m tonnes (MT) as of financial year ended 2012-13.

Cement is a cyclical commodity with a high correlation with GDP. The housing sector is the biggest demand driver of cement, accounting for about 67% of the total consumption.

The other major consumers of cement include infrastructure (13%), commercial construction (11%) and industrial construction (9%). 

TRENDS (CONTI….) Cement, being a bulk commodity, is a freight intensive industry

and transporting it over long distances can prove to be uneconomical.

This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region.

The Southern region of India has the highest installed capacity, accounting for about one-third of the country's total installed cement capacity. 

TRENDS (CONTI…..) Given the high potential for growth, quite a few foreign

transnational companies have ventured into the Indian markets.

Already, while companies like Lafarge, Heidelberg and Italicementi have made a couple of acquisitions, Holcim has increased its stake in domestic companies Ambuja Cements and ACC to over 50% to gain controlling interest.

Consolidation has taken place with the top two cement groups controlling nearly one-third of the total domestic capacity. However, the balance capacity still remains quite fragmented.