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Cement

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Cement industry in India

May, 2014

Introduction

India's potential in infrastructure is vast and cement plays a vital role in the growth and development of the nation. India is the second largest producer of cement in the world. The cement industry has been expanding on the back of increasing infrastructure activities and demand from housing sector over the past many years.

India's cement sector had clocked a 5.6 per cent growth in 2012–13 and projects a growth of 5–6 per cent in the next fiscal, which would be supported by an expected increase in demand from the rural sector and tier II and tier III cities, as per India Ratings and Research report. An investment allowance for infrastructure projects of Rs 100 crore (US$ 16.05 million) and above has also been announced by the Government.

In addition, cement production in India is expected to touch 407 million tonnes (MT) by 2020.

Market Size

Cement consumption in India is expected to rise by 8–9 per cent over the next year, taking the estimated cement consumption in 2013–14 to about 280–285 MT, from around 260 MT in the 2012–13 fiscal, as per the Cement Manufacturers Association (CMA).

The cement industry may continue to witness a steady market for the better half of the year with fresh capacity of 20 MT going on stream in 2014, taking the industry capacity to 370 MT.

The Indian cement sector is expected to witness positive growth in coming years, with demand set to increase at compound annual growth rate (CAGR) of more than 8 per cent during 2013–14 to 2015–16, according to RNCOS report titled, ‘Indian Cement Industry Outlook 2016’.

The cement and gypsum products sector in India has attracted foreign direct investments (FDI) worth US$ 2,879.95 million between April 2000 to November 2013, according to data published by the Department of Industrial Policy and Promotion (DIPP).

Investments

  • Bhutan's Dungsam Cement Corporation Ltd has made a foray into the Northeastern market. The company is selling cement under the brand name of Dragon Cement. "We are producing 4,130 tonnes of cement daily. We have invested close to Rs 1,088 crore (US$ 174.64 million) in this venture. We obtained necessary license to market cement in Indian market in January 2014," as per Mr Dorji Norbu, Managing Director of Dungsam Cement.
  • ACC has inaugurated a blended cement plant at Padubidri in Udupi district in Karnataka. The new facility has a capacity of 30,000 tonnes per month and will cater to the cement requirements in coastal Karnataka and Kerala.
  • UltraTech has received the green signal from the Competition Commission of India (CCI) for its US$ 605 million agreement with Jaypee Cement Corporation to purchase its Gujarat-based businesses.
  • Ambuja Cement has launched its first fully automatic 1 MT capacity terminal in Mangalore, Karnataka. “Through this new facility all States along the west coast are now covered by Ambuja Bulk Cement Terminals (BCTs),” according to Mr Ajay Kapur, Deputy Managing Director and CEO, Ambuja.
  • UltraTech Cement, an Aditya Birla group company, has announced plans to set up two cement plants entailing investments of over Rs 5,000 crore (US$ 802.57 million).
  • The company is setting up a cement grinding unit at Auj and Shingadgaon in Solapur, a terminal in Kochi and an integrated cement plant at Gulbarga, as per Mr Krishna Srivastava, Whole-time Director, Zuari Cement Ltd. The new plant at Gulberga will have capacity for 3 million tonnes per annum (MTPA).
  • UltraTech Cement's plant and 75 megawatt (MW) captive power plant, with an investment of Rs 2,500 crore (US$ 401.28 million), have received approval from the Expert Appraisal Committee (EAC), under the Ministry of Environment. The cement plant in the Karur and Dindigul districts of Tamil Nadu will be spread over 136.23 hectares (ha).
  • The CCI has approved the proposed acquisition of cement plants of Jaypee Cement Corporation Ltd, comprising an integrated cement unit at Sewagram and grinding unit at Wanakbori in Gujarat by Ultratech Cement Ltd.

Government Initiatives

The housing segment accounts for a major portion of the total domestic demand for cement in India. The Government of India (GoI) is strongly focused on infrastructure development to boost economic growth and plans to increase investment in infrastructure to US$ 1 trillion in the 12th Five Year Plan (2012–17). During the Plan, the industry is estimated to add a capacity of 150 MT.

An EAC under the Ministry of Environment, Go I, has given its approval to India Cements to double its capacity and set up a 40 megawatt (MW) power plant at one of its facilities in Tamil Nadu at a cost of Rs 810 crore (US$ 130.01 million). The proposed expansion project will come up at Dalavoi in Ariyalur district.

Giving impetus to the market, the Goa State Pollution Control Board (GSPCB) has signed a memorandum of understanding (MoU) with Vasavdatta Cement, a company with its plant in Karnataka. The firm would use the plastic waste collected by the state agencies and village panchayats from Goa as fuel for its manufacturing plant.

Road Ahead

India has the capacity to become the world's third largest construction market by 2025 and a US$ 1 trillion market, according to a study by Global Construction Perspectives and Oxford Economics.

The focus of the government on strengthening infrastructure, promotion of low-cost affordable housing, etc, is expected to drive cement demand.

With the ever-increasing industrial activities, real estate, construction and infrastructure, in addition to the onset of various Special Economic Zones (SEZs) being developed across the country, there is a continuous demand for cement.

Moreover, major cement manufacturers in India are also increasingly using alternate fuels, especially bioenergy, to fire their kilns. The step will not only help to reduce production costs of cement companies, but is also proving effective in reducing emissions.

Exchange Rate Used: INR 1 = US$ 0.01605 as on February 12, 2014

References: Media Reports, Press Information Bureau (PIB), Cement Corporation of India, Department of Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)