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Cement report

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  • 1. INTRODUCTION -India is the second fastest growing economy in the world after China. Variousindustries are contributing for this growth. They are Agriculture, Infrastructure,Energy & Power, Banking & Finance and service sector. In India, Construction is thesecond largest economic activity after agriculture and is poised for continuousgrowth due to industrialization, urbanization and economic development withexpectations of improved living standards of people in India. It accounts for nearly65 percent of the total investment in infrastructure, employs 33 million peopleapproximately and accounts for 6-8 percent of GDP. The Construction industry isprimarily driven by Government of India investment on core infrastructure projectsand creation of urban infrastructure, industrial capital expenditure by corporatesector and development activities of real estate or housing sector in urban as well asrural areas.The Indian economy is booming, with rates of Gross Domestic Product (GDP)growth exceeding an average of ~7% every year since 2003/04. This ongoing growthis due to rapidly developing services and manufacturing sectors, increasingconsumer demand (largely driven by increased spending by India’s middle class)and government commitments to rejuvenate the agricultural sector and improve theeconomic conditions of India’s rural population. The production of industrialmachinery has also been on the rise – and the increasing flow of goods has spurredincreases in rail, road and port traffic, necessitating further infrastructureimprovements.As per the Eleventh Five Year Plan, more than USD 500 billion worth of investmentis planned to flow into India’s infrastructure by 2012. Construction projects accountfor a substantial portion of the proposed investments, making the E&C sector one ofthe biggest beneficiaries of the infrastructure boom in India. The regulatoryenvironment is relaxing to encourage further foreign direct investment (FDI).
  • 2. Construction Sector-Macro Aggregates -Macro-Variable 2006-07 2007-08 2008-09 2009-10 2010-11GDP from Construction(at Constant pries – RsCr)284798 315389 332557 355918 384629Share of Construction inGDP (%)8 8.1 8 7.9 7.9Growth rate for GDP inconstruction (%)10.3 10.7 5.4 7 8.1Source: Handbook of Statistics, RBI-2010-11.Construction Industry 2009 2010 2011Cement Consumption (M.T.) 142.23 159.43Residential construction workload(M.T.)78.7 75.5Total construction output(YOY growth rate %)5.90% 6.50% 10.00%Labour rates % increases 2-5 % 2-5 % 2-5 %GROWTH DRIVERS IN CONSTRUCTION INDUSTRY -Growth in Infrastructure -1. Approximately 10 lakh crores is to be spent in the next five years oninfrastructure. While 50% investments in infrastructure will be done by thegovernment through cash contracts, the remaining will be either pure privateinvestments or PPP projects.
  • 3. 2. In the total investment on Infrastructure, minimum 45 % is towardsconstruction and 20 % spend will be for modernization of the constructionindustry.Growth in Building sector -1. Industrial sector sees a steady growth and contributes to the constructionsector in the non-residential segment.2. IT growth would continue to create a demand for commercial facilities. STPsand SEZs are being built by real estate developers.3. Hospitality and Tourism industry is driving the demand for hotels andresorts.4. Retail growth on account of increasing consumer disposable incomes isdriving the demand for commercial area development on a large scale.Growth in Housing -1. The current trend in real estate market is that after making investments inland the project construction is mainly retail financed.2. The real estate developers traditionally employed contractors for constructionof projects. Several large contractors are transitioning towards becoming realestate developers as well.INDUSTRY SEGMENTATION -Construction sector can be broadly classified into 2 sub-segments:1) Real estate (Residential, Commercial/Corporate, Industrial and SpecialEconomic Zones (SEZs))2) Infrastructure (Transportation, Urban development, Ruraldevelopment, Utilities)
  • 4. Figure-1: Construction Industry Structure.Indian Real Estate Sector -The real estate and construction sectors are playing a crucial role in thedevelopment of Indias core infrastructure. The real estate industrys growth isdepends on the developments in the retail, hospitality and entertainment (hotels,resorts, cinema theatres), hospitals, schools and IT enabled services. It has greaterprominence in India with the liberalization of economy, increase in businessopportunities and labour migration.
  • 5. The Government of India has allowed FDI up to 100 percent in the automaticroute in townships, housing, built-up infrastructure and construction developmentprojects to increase investment, generate economic activity, and create newemployment opportunities. The Union Budget 2012-13 shown more importance onaccelerating the pace of investment in infrastructure, as this is critical for sustain andaccelerating an overall growth.Major Projects in Real estate sector in India -• Mumbai based Wadhwa Group to invest Rs 9-10 billion to develop 1.6million sq. ft. Of office space in Bandra Kurla Complex, Mumbai. Theproject will consist of two office towers and is due to be completed by2014.• Bangalore-based Embassy Property Developments is in talks with globalfinancial services group, JP Morgan to raise Rs. 500 crore for two projects– premium villa project and a IT-cum-residential development on BellaryRoad.• Kochi-base Asten Realtors has proposed to invest Rs 1,000 crore in thenext three years in various projects in central Kerala.• Avalon Group has made the initiative to start up Rs 200 crore projectnamed "Avalon Regal Court" in Bhiwadi, Rajasthan. The project is beingplanned on tweleve-acre space consisting of eight hundred housing unitsand is expected to be completed over the next three years.Driving Forces -• Growth in the economy.• Indias emergence as an attractive offshore destination and availability ofpool of highly skilled technicians and engineers.• Developments of large captive units of major players include GE,Prudential, HSBC, Bank of America, Standard Chartered and AmericanExpress.• Rise in disposable income and growing middle class, increasing thedemand for quality residential real estate and real estate as an investment.
  • 6. • Entry of professional players equipped with expertise in real estatedevelopment.• Relaxation of legal rulings and processes by the governing bodiesencouraging investments in real estate.• Improvement in infrastructure facilities.Infrastructure Sector in India-Performance of core industries:Sector weight2007-08 2008-09 2009-10 2010-11 2011-12 Apr-Nov2011-12Apr-Nov2012-13Jan2012Jan2013Coal 4.38 6.3 8 8.1 -0.2 1.2 -4 6.7 7.7 2.3Crude oil 5.22 0.4 -1.8 0.5 11.9 1 2.9 -0.5 -2 -0.2Naturalgas1.71 2.1 1.3 44.6 10 -8.9 -8.5 -13.1 -10.4 -16.8Refineryproducts5.94 6.5 3 -0.4 3 3.1 4.4 7.2 -4.6 10.5fertiliserx 1.25 -7.9 -3.9 12.7 0 0.4 -0.7 -3.3 4 -9.1Steel 6.68 6.8 1.9 6 13.2 7 8.9 3.4 4.5 9.4cement 2.41 8.1 7.2 10.5 4.5 6.7 4.8 6.7 10.9 -6.6electricity 10.32 6.3 2.7 6.2 5.6 8.1 9.4 4.6 3.2 5.9Overalindex37.9 5.2 2.8 6.6 6.6 4.4 4.8 3.5 2.2 3.9Source: Press Information Bureau, Government of India Ministry of Commerce & Industry.
  • 7. CoalCrudeOilNaturalGasRefineryProductsFertilizersSteelCementElectricityOverallIndex-15-10-5051015Apr-Nov2011-12Apr-Nov2012-13IndustryGrowthRate(%)Industries which support the infrastructure are crude oil, petroleum, refineryproducts, coal, electricity, cement and finished steel having weight of 37.9 % in theindex of Industrial Production(IIP) and shown the cumulative growth rate of 3.9 %in Jan 2013 increased from 2.2 % in Jan 2012. The most affected sector whose growthhampered adversely in FY13 (Jan 2013) was natural gas with a growth rate of -16.8 %(FY12 -10.4 %) followed by crude oil with growth rate of -0.2 % (Jan 2012 -2.0%),Cement -6.6% (Jan 2012 10.9 %) and Coal 2.3 % (Jan 2012 7.7 %), Fertilizers withgrowth rate of -9.1 % (Jan 2012 4.0%) and remaining sectors shown the growthmoderately. These include Refinery Products 10.5 % (Jan 2012 -4.6%), steel withgrowth rate of 9.4% (Jan 2012 .5 %), Electricity with growth rate of 5.9 % (Jan 20123.2).Cement production registered to growth of (-) 6.6 % in January 2013 againstits 10.9 % growth in January 2012. The cumulative growth of cement production was
  • 8. 6.7 % during Apr – Jan 2012-13 compared to its 4.8 % growth during the same periodof 2011-12.The manufacturing industry growth depends on the inputs from these coreindustries especially on electricity. Therefore it is of utmost importance to amplifycore sectors production. Indian Government taking much future plan of actionsimmediately and quickly towards it. The union budget for 2012-13 has given fullexemption from basic customs duty to fuels such as natural gas, liquefied naturalgas; steam coal and uranium concentrate imported for power generation. Viabilitygap funding has been extended to capital investment in fertilizer industry, oil andgas storage and pipeline facilities for supporting the scheme of public privatepartnership (PPP).The Union Budget 2013-14 give more impetus to infrastructure sector -• Infrastructure Debt Funds (IDF) to be encouraged.• IIFCL to offer credit enhancement.• Infrastructure tax-free bond of 50,000 crore in 2013-14.• Build roads in North Eastern states and connect them to Myanmar withassistance from WB & ADB.• Raising corpus of Rural Infrastructure Development Fund (RIDF) to20,000 crore and 5,000 crore to NABARD to finance construction forwarehousing.• Window to Panchayats to finance construction of go downs.Roads -• 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra,Rajasthan and Uttar Pradesh will be awarded in the first six months of2013-14.• Target of covering length of 8,800 kms under National HighwayDevelopment Programme (NHDP) during FY13. Allocation of the RoadTransport and Highways Ministry enhanced by 14% to Rs.253.6 billion.Ports -
  • 9. • Two new major ports will be established in Sagar, West Bengal and inAndhra Pradesh.• A new outer harbour to be developed in the VOC port at Thoothukkudi,Tamil Nadu through PPP at an estimated cost of 7,500 crore.Opportunity Pie -
  • 10. Source: Twelfth Five Year Plan (2012-2017) Faster, More Inclusive and sustainable Growth Volume – I.26.9416.4116.9311.549.054.583.551.571.05 2.675.72Investment in the infrastructure sector during 12th five year panElectricity (incl. RE)Roads and BridgesTelecommunicationsRailways (incl. MRTS)Irrigation (inc WS)Water supply and SNPorts (incl. ILW)AirportsStorageOil nd Gas pipelinesRenewable EnergyPlanned Infrastructure Investments -Indias economy has been growing at a rapid pace, and to maintain themomentum of its growth, the Government has strengthened its focus oninfrastructure development in the country. It has increased its infrastructure spendas a percentage of the countrys GDP from 5.15 % during the Tenth Five Year Plan(2002-2007) to 7.55 % during the Eleventh Five Year Plan (2007-2012). This isexpected to increase to over 9.00 % during the Twelfth Five Year Plan (2012-2017).The Government plans to double its investment in infrastructure to INR 40.9 trillionduring the Twelfth Five Year Plan from INR 20.5 trillion during the Eleventh FiveYear Plan period, as compared to planned infrastructure investments of INR 8.7trillion during the Tenth Five Year Plan period. It should however be noted that
  • 11. actual investments during the Tenth Five Year Plan period had met the target, andthat of the Eleventh Plan period may realize 80 % of the target.PowerRoads&BuildingsTelecommunicationsRailwaysIrrigationWaterSupply&SanitationPortsAirportsStorageOil&GasPipelines01020304010th five year plan 11th five year plan 12th five year plan%ofexpenditureThe telecom sector has been witnessing increasing investment over the past 10years. During the Twelfth Plan Period, almost 25 % of investments are expected to beinvested in this sector. While the roads & bridges sector has remained flat (17%) as apercentage of the overall pie, the telecom sector is expected to witness a CAGR of~10 % from 2002 to 2017. Another sector, which has gained increasing prominence isthe oil and gas segment – with the Governments spend on the sector expected toincrease from 3.5 % of its total infrastructure spend during the Tenth plan to 6.4% inthe Twelfth Plan.The Planning commission has targeted an ambitious investment of Rs. 65 lackcrores for the 12thfive year plan. To achieve the target infrastructure investment has
  • 12. to be raised to 10% of GDP from current 8%. The average growth rate of India’sgross domestic savings has been over 30% in past 4-5 years.Sector wise Investment during Five Year Plans –Sector Tenth Plan EleventhPlanTwelfth Plan(Projections)Electricity (Incl. RE) 274,661 728,494 1,501,666Central 103,431 233,501 4,407,961State 102,054 184,696 347,043Private 69,176 310,297 713,827Roads nd Bridges 152,616 453,121 914,536Central 71,536 194,678 336,094State 68,143 165,903 274,433Private 12,937 92,540 304,010Telecommunications 144,669 384,962 943,899Central 50,626 86,375 72,110Private 94,042 298,586 871,789Railways (incl MRTS) 103,493 242,906 643,379Central 100,077 192,147 419,221State 2,743 41,671 136,158
  • 13. Private 672 9,090 100,000Irrigation (Incl WS) 121,475 243,497 504,371Central 9,661 14,426 42,171State 111,814 229,071 462,200Water Supply and SN 60,577 120,774 255,319Central 21,508 46,003 98,382State 37,958 74,607 150,582Private 1,111 164 6,355Ports (Incl ILW) 22,351 44,536 197,781Central 2,630 5,480 20,670State 916 2,759 5,563Private 18,805 36,298 171,548Airports 7,354 36,311 87,714Central 3,855 11,873 15,041State 717 1,030 2,449Private 2,782 23,408 70,224Storage 5,591 17,921 58,441Central 3,065 5,956 12,280State 124 2,116 4,198Private 2,402 9,850 41,963Oil and Gas Lines 23,389 62,534 148,933Central 21,088 35,179 71,594State 2,279 4,070 5,969Private 23 23,284 71,370Renewable Energy 89,220 318,626Central 9,630 33,003State 1,018 5,425
  • 14. Private 78,572 280,198Grand Total 916,176 2,424,277 5,574,663Central 387,477 856,717 1,601,061State 326,748 680,056 1,289,762Private 201,951 887,504 2,683,840Grand Total 916,176 2,424,277 5,574,663Public 714,225 1,536,773 2,890,823Private 201,951 887,504 2,683,840GDP mp 18,246,267 33,604,450 68,163,208Investment as % ofGDP con.5 7 8Roads & Highways -India has the worlds second - largest road network, comprising a total lengthof 4.2 million km, and accounting for 87 % passenger traffic. Total investment in theTwelfth Five Year Plan is estimated to be 9,14,536 crores. The National HighwayDevelopment Programme (NHDP) has planned a high expenditure. It seeks toaward 29,000 km of roads from FY 2011 to FY 2015 – out of this, 7,300 km wereawarded in FY12. (PPP mode) Till August 2011, 247 PPP projects were awardedunder NHDP.Railways -Indian Railways network spans over 64,000 route km, making it the worldsthird largest rail network in terms of size besides being the largest passenger carrierand the fourth – largest rail freight carrier globally. In the Twelfth Five Year Plantotal investment is estimated to be 6,43,379 crores (including MRTS). Rail projects inIndia have been typically the domain of the public sector. However, based on thesuccess of PPP in other infrastructure sectors, the Indian Railways has begun to takesteps to explore the PPP route. Mass Rapid Transit System (MRTS) is expected tocomprise major portion of total planned investments in coming years. During the
  • 15. Twelfth Plan period, private sector spending is expected in MRTS systems in citiessuch as Mumbai, Bangalore, Hyderabad and Kolkata. The Indian Railways is alsoexpected to initiate PPP projects to maintain & develop railway stations. It hasidentified 22 stations across India that will be modernized into world – classfacilities.Ports -India has 13 major ports and around 200 non-major ports, accounting for 95 %of the countrys total trade in terms of volume, and round 70 % in terms of value.During 2006 – 11, cargo traffic at Indian ports increased at a CAGR of 7.98 % from8.7 million tons to 883 million tons. In the Twelfth Five Year Plan total investment isestimated to be 1,97,781 crores. The National Maritime Development Programmeseeks to add 230 million tonnes per annum in capacity in 10 years. To achieve this,the Ministry of Shipping (MoS) plans to award 24 capacity expansion projects atmajor ports. These projects include a mega container terminal at Chennai port and amechanized berth at Vishakhapatnam. However, the only project that has beenawarded so far is the Jawaharlal Nehru Port Trust Terminal.Airports -India has a total of 136 airports with 9 owned by the Airport Authority ofIndia. During 2007–11, passenger and freight traffic at Indian airports increased at aCAGR of 10.44 % & 10.9 %, respectively, despite global slowdown. In the TwelfthFive Year plan total investment is estimated to be 87,714 crores. With prospects forgrowth in tier II and tier III cities looking bright, the Ministry of Civil Aviation(MoCA) has approved new Greenfield airports. The Navi Mumbai airport is to bethe largest Greenfield airport in terms of cost and capacity, and is expected to be bidout this year. The nodal agency CIDCO is in the process of finalizing the bidmechanism. However, feasibility of such large projects continues to be a concern.Infrastructure linkages are also immensely important, since provision of adequateroad, rail and water transport facilities will be critical for the success of large scaleairport development plans.Power -
  • 16. Indias total installed power generation capacity stood at 2,11,766.22 MW ason 31-01-2013. Robust economic growth and enhanced industrial activity hassignificantly increased the demand for power in the country, leading to as much as12 % peak hour power shortages. This makes a compelling case for further largescale investments in the sector. In the Twelfth Five Year plan total investment isestimated to be 15,01,666 crores. With the announcement of 14 Ultra mega powerprojects (UMPPs). Out of these, four (Ssn, Mundra, Krishna Patnam and Tilaiya)have already been awarded to private players.Oil & Gas -Indias oil & gas sector continues to grow steadily, boosted by enhancedinvestments, increased production and rise in private participation. In the next fiveyears, planned additions include 60.3 MMTPA of refinery capacity. 7.05 MMTPA ofnew LNG terminals. In the Twelfth Five Year plan total investment to be 1,48,993crores. Projects include an 18 MMTPA refinery being setup by Indian OilCorporation and a cracker unit of 5 MMTPA capacity by Reliance Industries Limitedin Jamngar.Infrastructure Performance: (Growth in %)Sector FY 08 FY 09 FY 10 FY 11 FY12(April-DecPower 6.3 2.5 6.8 5.7 9.3Railway revenue-earningfreight traffic9 4.9 6.6 3.6 4.7Cargo handled at major ports 12 2.2 5.7 1.6 0.4Civil AviationExport Cargo handled 7.5 3.4 10.4 13.4 -1.1Import cargo handled 19.7 -5.7 7.9 20.6 1.4Passengers handledinternational terminals11.9 3.8 5.7 11.5 7.2Passengers handled at 20.6 -12.1 14.5 16.1 17.5
  • 17. domestic terminalsTelecommunicationCell phone connections 38.3 80.9 47.3 18 -51Roads *NHAI 164.6 30.9 21.4 -33.3 8.9NH(o) & BRDB 12.5 17.3 4 -6.8 -36.5Source: Ministry of Statistics and Programme Implementation (MOSPI) and D&B Research* Indicates Widening to four lanes & two lanes and strengthening of existing weak pavement only.Notes: NH(O) stands for National Highways Organization and BRDB for the Border Roads DevelopmentBoardThe Infrastructure sector during FY 2012 for the period April to Decembernoted a moderate growth. The growth rate of power sector during FY 2012 washigher than the growth of FY 11. Railway sector has also shown slight growth inrevenue from freight traffic. Civil aviation passengers handled at domestic terminalsgrew marginally while passengers at international terminals as well as exportimport cargo handled declined severely. In road sector up gradation of highways byNH (O) & BRDB depicted a negative growth.RAW MATERIALS, EQUIPMENT AND TECHNOLOGY -Construction materials and equipment sector accounts for approximately8.6% of Indias GDP and accounts for nearly two-third of the total construction coston an average. The share of construction materials in project costs ranges from 40-60% and the corresponding cost for construction equipment ranges from 5 to 25%.Construction component comprises nearly 60-80 % of project cost of infrastructureprojects like roads, housing etc. In projects like power plants, industrial plants, etc.The share, though lower, is critical. Construction materials and equipment sectorcomprises of various sub-industries such as:• Cement• Steel• Paints & Chemicals
  • 18. • Petroleum Products and resins• Fixtures & fittings• Aggregates such as concrete and asphalt• Timber• Tiles and ceramics• Aluminium, Glass & Plastics.Since most of the materials are either manufactured locally, in cottage or small scaleindustry, data available for quantifying the exact nature of linkages withconstruction is not very accurate. On the other hand, linkages of products such aspaints and petro-products would again be difficult due to their stronger linkageswith other sectors. Where as in case of cement and steel, almost 100% of cementproduction is consumed in construction and 40 – 60% of steel production goes intoconstruction.Urban Construction Strategies -Large size precast piers are used in the construction of flyovers over existingroads or other utility services that are too important to be closed or dismantled forthe construction work of the flyovers. These massive precast structures are erected atsite with large capacity cranes that are themselves not to restrict the flow of traffic. Inaddition, the Indian Society of Trench less Technology (INDSTT) introduced thetrench – less pipe laying technology to assist in interruption free construction inurban environments. Besides project design, development, implementation andmonitoring are gradually getting transferred to the computers by consultants, projectowners and contractors. Some leading corporate agencies are planning initiatives forweb – enabled design, control and monitoring of construction projects.
  • 19. Nanotechnology in Cement Industry -Nanotechnology can play a significant role in the construction industry andstands at eighth position in terms of most significant areas of applications innanotechnology. Nanoengineering of cement based materials can result inoutstanding or smart properties. Introduction of nanotechnology in cement industryhas the potential to address some of the challenges such as CO2 emissions, poorcrack resistance, long curing time, low tensile strength, high water absorption, lowdurability and many other mechanical performances. A remarkable improvement inthe mechanical properties and durability of cementitious materials can be observedwith incorporation of nanomaterials such as nno-SiO2, ZnO2, Al2O3, TiO2, carbonnanotubes, nano-days, carbon nanofibers and other nanomaterials.Demand Drivers of Construction Materials Industry:Government initiatives in the infrastructure sector, coupled with the housingsector boom and urban development, continue being the main drivers of growth forthe Indian construction materials industry.• Individual Housing Demand – Primary drivers -◦ Efforts by the government to boost the demand for houses in the below Rs20-lakh category in stimulus packages.◦ Decrease of land prices and steel prices◦ Increase in minimum support price (MSP)◦ Increase in pay for workers under the flagship rural job guaranteescheme.◦ Implementation of debt waiver scheme.◦ Implementation of the Sixth Pay Commission.
  • 20. • Huge infrastructure investment planned for Twelfth Five Year Plan (2012-17) amounting to Rs. 56.32 lakh crores is also expected to drive thedemand for construction material industry.Construction Equipment – Success Factors1. Ability to introduce India specific products that include low pricedmultipurpose equipment to attract new customers and to increasemechanisation in important areas adding features to products that makesuitable for use in India and launching new applications and products formissing applications.2. Ability to capture exports opportunities in areas such as engineering anddesign services that leverage the Indias technical prowess3. Quality, delivery and pricing of after – sales service.4. Ability to provide end-to-end services including equipment selection,financing, maintenance, training and repairs.5. Introduction of newer services such as rentals and financings to catalyselatent demand particularly from rural areas and small towns.6. Strengthening of dealer and channel network to address buyer fragmentationfollowing the trend of sub – contracting and geographic expansion ofdemand.Construction Equipment – Risk Factors1. Competition from low-cost producers.2. Tax burden and anomalies- India has one of the highest indirect taxes onconstruction equipment.3. Dependence on import for certain critical components.4. Volatility of steel prices impacting production costs.BENEFITS OF THE CONSTRUCTION INDUSTRY TO THE SCOIETY-1. Absorbs rural labour and unskilled workers (in addition to semi-skilled andskilled)
  • 21. 2. Provides opportunity for seasonal employment thereby supplementingworkers income from farming.3. Permits large-scale participation of women workers.4. Development of Infrastructure, thereby sustaining the growth of economy.CEMENT INDUSTRY -Cement industry plays a crucial role in the development of the infrastructurein any country. Due to the various construction activities undertaken by the centralgovernment, state governments, public sector and other organizations to meet the
  • 22. needs of the massive population in the country generate huge demand for cement.And also provision for housing is the first and foremost requirement of everyhousehold and, therefore, market demand of cement for private consumption isincreasing constantly. According to the Ministry, the liberalization process providedthe much desired demand to the cement industry and, the growth was quite visibleleading to noticeable growth in terms of 100 million tonnes capacity addition duringthe decade 1999 to 2009.Key points -• Cement Industry is now the second largest cement producer in the worldafter china.• 183 large cement plants and more than 360 mini cement plants• 330 million tonnes a year installed capacity.• 97 percent of the installed capacity is accounted for by large producers (~42)• 21 top companies control 90 percent of the market.• 40 percent of the market is controlled by two groups, Holcim and AdityaBirla Group.Invention of Cement -Ever since the civilizations first started to build, the world has sought a man –made bonding material that would bind stones into a solid formed mass. During thepalcolithic age, men were used to enjoy the adequate shelters provided by nature.The bronze age has witnessed the use of building materials from the clay basedmixture and air handling lime. The Egyptians advanced to the discovery of lime &gypsum mortar as a binding agent for building such structures as the pyramids. TheGreeks have made further improvements and finally, the Romans have developedthe cement that produced structures of remarkable durability. The secret of romansuccess in making cement was traced to the mixing of slaked lime with pozzolona,volcanic ash from Mount Vesuvius. The cement produced on this process wascapable of hardening under the water. This art was somehow lost during the middleage periods.
  • 23. In the 18thcentury, big efforts were started in Europe to understand why somelines have hydraulic properties. John smeaton concentrated his work in this field andhe made the first modern concrete by adding pebbles as a coarse aggregate alongwith mixing powered brick into the cement in the year 1759. A number ofdiscoveries have followed. It was in the year 1817 louis ricat has conducted the workas the hydraulic nature of the lime – volcanic ash mixture. He was the first person toaccurately determine the proportions of lime stone and silica required to make themix of cement. Finally, in the year 1824, joseph aspdin patented the basic process ofslower setting cement. He addressed this as Portland cement due to the fact that inappearance and hardness, it resembled the upper Jurassic rock found in the region ofPortland in southern England.Global Production of Cement -The world combined cement production all over the world accounted for 3.78billion tonnes in the year 2012 (3.60 billion tonnes in 2011). Out of which, china hascontributed substantially to the world production. China and India virtually havereached the stage of self – sufficiency related to production of cement.USBrazilChinaIndiaIranJapanPakistanRussiaTurkeyVietnam05000001000000150000020000002500000Global Cement Production-2011
  • 24. Global Top Consumers –ChinaIndiaUSABrazilRussiaIranTurkeyEgyptVietnamIndonesia0100200300204822272 65 58 56 56 50 49 48Top Consumers - 2011CountryConsumption(Mn.T)China leads the way in cement consumption and production around the world dueto the large scale developments and infrastructure build-up projects that the Chinesegovernment is undertaking. Some of the slowdowns in production are due todramatic downward demand shifts in the residential housing markets of the UnitedStates and Europe. However, public projects are keeping the total cement productionaround the world on the rise. It is interesting to note that production is concentratedin developing nations. With the exception of the US, Japan and Spain, all othernations are still in a developing phase. While the majority of the production is locallyconsumed, a good chunk of the cement produced is exported. This means that comeproduction has shifted to these nations – whether it is because of cheaper labour, lessstrict environmental regulations, or subsidies.Export of Cement Globally-Country 2009-10 2010-11Qty (T) Value (Rs 000) Qty (T) Value (Rs 000)All countries 2689485 6657266 3612062 9554773
  • 25. Nepal 1351941 3416817 1766895 5236164Srilanka 206250 442858 932251 1864054Iraq 175150 474169 189982 472490Maldives 21935 56446 108910 449607South Africa 9884 39790 47043 197662Soudi Arabia 9884 39790 47043 197662Egypt 17335 33292 110758 168119UAE 50636 157719 54004 145337Mozambique 65038 122069 52811 109922Madagascar 41736 78179 58421 108353Other Countries 721501 1720303 219046 573543Indian cement accounts for not more than 0.2% of total world cement exports.The sectors relatively insulated from international markets. Given by bulky natureof the commodity and inadequacy of transport infrastructure in the country,international trade has been limited to neighbouring states in small quantities. Eventhat mini scale volume of exports took a beating after the south East Asian crisis,though the situation has improved gradually and the export of cement (total)increased considerably to 3.61 million tonnes in 2010-11 from 2.69 million tonnes in2009-10. Exports of cement in 2010-11 were mainly to Nepal (49%), Sri Lanka (26%),Iraq (5%), Egypt & Maldives (3 % each).Import of Cement-Country 2009-10 2010-11Qty (T) Value (Rs 000) Qty (T) Value (Rs 000)All countries 2111997 5683270 1095624 3526386Pakistan 652060 1936300 594481 1688541Bangladesh 169586 624565 289084 1056092
  • 26. China 568757 1371538 177999 542014Germany 1161 18593 7422 74223UAE 5983 38777 4800 31086Malaysia 17854 51762 8896 29920France 1010 29934 994 28767Netherlands 976 25525 1264 24779Bhutan 3061 9520 3278 12367UK 266 6707 307 6760Other countries 691283 1570049 7099 31837Cement imports in 2010-11 decreased sharply to 1.1 million tonnes from 2.11 milliontonnes in 2009-10. Main suppliers in 2010-11 were Pakistan (54%), Bangladesh (26%)and China (16%).Porters Five Forces -Porters five forces provide a competitive framework that allows us to betterunderstand the different dimensions that govern market competition.Porters five forces are:1. Internal Rivalry2. Threat of substitutes3. Buyers bargaining power4. Supplier bargaining power and5. Entry and exit barriersRivalry within the cement industry is moderate. The structure of the markettends to be oligopolistic in different regions around the world. In other words only afew firms control the market in many different countries. This is due to the highfixed cost. This creates a highly concentrated firm environment with limited rivalry.On the other hand, cement products are not differentiated. This means that
  • 27. competition between existing firms can get intense. When consumers do not bare acost by switching from one firm to another (low switching costs) and when theproduct lacks differentiation, this creates haven for competition and intense rivalry.The combinations of the above factors result in moderate rivalry within the globalcement industry.The second force is the threat of substitutes. Lack of substitutes – otherproducts that are not within the same industry but can be used instead. This meansthat the industry does not face a credible threat of competition. This represents thereality of cement industry. No product exists to date that can substitute effectivelyfor cement. While construction firms can useless cement in exchange for using othermaterials that have some cementitious quality, that substitution effect is negligibleon the market price of cement. An industry is only threatened if another industryproduces a similar product or if consumers of that product can decrease the ratio oftheir use of that product and use another product (minimal partial substitution).Both of these choices are virtually non – existent to cement consumers, hence thethreat of substitutes is very low.Buyer bargaining power – Pure buyer power exists when only one buyerexists in the market (monopsony). In this case power is entirely in the hands of thebuyer. In the cement industry, facts suggest that this effect is minimal. The power ofconsumers is limited due to the lack of substitutes, the small number of cement firms(oligopoly), and the inelastic demand that consumers have for the product. Buyersare said to be powerful if they are highly concentrated, purchase a large amount ofthe product, or if there is product standardisation. The last effect exists but its impactis weak because of persistent shortages in the cement market. Given the fact that thebuyers in the cement market lack the characteristics that give them power overproducing firms, the competitive level of the industry judged through this force isvery low. Firms have an easier time setting price while buyers act generally as pricetakers.
  • 28. Suppliers if powerful can extract some of the profits that producing firms aremaking off of consumers by raising the prices of raw materials. In the inputs marketfor the cement industry, suppliers are concentrated - but buyers are alsoconcentrated. This means that initial bargaining is practically on equal footing.Suppliers of cement industry are divided into two categories – 1.Suppliers oftransportation and 2.Suppliers of raw materials (clinker). Cement manufacturershave argued that price hikes in the cement industry are due to increases in the priceof both transportation and raw materials. This means that suppliers are powerfulenough to force new process to the cement industry. However, the weakness of thefinal product. In general suppliers are powerful if there is a credible forwardintegration threat (suppliers can buy producing firms), suppliers are concentrated(no switching opportunity), the cost is prohibitive to switch suppliers, and if asupplier can rally up the final consumer. In this case of cement the power ofsuppliers comes from their concentration regionally and from the high cost inswitching between suppliers. It is not easy for a cement firm to buy clinker fromchina and ship it to India or vice versa. This means that local raw materialproduction must be utilized and that local or regional suppliers have high barragingpower.High barriers to entry mean that firms already in the industry do not fearoutside competition. That means rivalry amongst firms is not intense. In factincentives for intra-industry cooperation or backhanded collusions such as cartelsare highly plausible. Barriers to exit on the other hand means that firms already inthe market are locked in. This can result from the firms inability to sell the assets if itdecides to leave the industry. Barriers to entry and exit can be seen in four differentways. First, government creates barriers by limiting the number of licenses it sells forproduction. Cement is energy intensive as wee as highly polluting; therefore entry tosuch a market has to be highly regulated in the eyes of many governments. Second,patents create entry barriers. Patents on new production methods or machines createdifficulties for firms to enter. However, the cement industry is not a patentdependent industry, unlike other industries such as pharmaceuticals. Third, assets
  • 29. needed to produce cement cannot be easily utilized for another industry (the cementindustry is highly asset specific). This means that if a firm decides to enter into themarket it must realize that a cease in its production will be very costly. Finally,economies of scale can prevent entry. For cement firms, neutralizing the high fixedcosts require minimum efficient scale of production that creates a strong barrier toentry. Overall, the cement industry has high barriers to entry and high barriers toexit.
  • 30. Note: The above diagram explains Porters five competitive forces as they relate to the cement industry. "E"represents the force has an effect on the cement industry in intensifying rivalry, "O" represents that it plays anopposing role, and "N" represents the force has neutral or no relevance to the industry.Rivalry is moderate, the effect of substitutes is weak, buyer power is minimal,supplier power is high, and entry/exit barriers are both high. In essence, the verticalsupply chain has pricing power over final consumers, whereas the horizontaldimension of competition is lacking due to lack of the possibility of differentiatedadvantages in production. Inelastic demand neutralizes the consumer powerassociated with product standardization, whereas proximity of raw materials toproduction sites generates regional cement clusters.EVALUATION OF CEMENT INDUSTRY –Era Year Remarks about capacity, Growth, ConsumptionDominantImports1914-1924 Cement consumption was around 2 million tonnes during thisperiod of 10 years; 50 % was through imports. Production inthe year 1914 was 10,000 tonnes and in 1924 production wasaround 0.26 million tonnes a year against capacity of halfmillion tonne.Struggle andSurvival1924-1941 Indigenous production went from 3.66 lakh tones in 1925 to18.30 lakh tonne in 1941. Imports contributed to less than 7 %of total cement consumption during 1924-1942.Price inControl1942-1951 Production stepped up from 1.8 million tonnes in 1942 to 3.28million tonnes in 1951. Imports dwindled to less than 2 % oftotal consumption.Planning andControl1951-1982 Growth in cement capacity but not at requisite pace. Capacitywas 29.26 million tonnes in 1981-82.PartialDecontrol1982-88 Quantum jump in capacity and production during 1982-88.(57.47 Million tonnes in 1987-88) Cement became surplus from1987 onwards.
  • 31. Total Decontrol March1989onwardsDuring the period 2009-10 capacity rose to 236 million tonnes.The industry structure changed over the years. During the year 1914-24 mostof the requirement was met through imports before indigenous production started.Subsequently Government played a major role in Planning & Control. After theindustry was decontrolled the capacity grew manifold and by the end of 2009 theannual capacity was around 219 MT. The selling strategy of firms and the buyingbehaviour of customers also saw a major change. Cement from being a purecommodity dependent on price alone is being recognized as a product who’s pricingand demand could be varied through various marketing promotions. Brands startedemerging after total decontrol in the year 1989 and certain brands startedcommanding premium due to quality perceptions. Therefore positioning of cementbrands in the customers minds play a vital role.Globalization of Indian Cement IndustryThe Globalization of Indian Cement Industry has helped the industry torestructure itself to cope up with the alterations in the global economic and tradingsystem. The Indian cement industry is one of the oldest industries. It has beencatering to Indias cement requirements since its emergence during the British Raj inIndia. Though the majority of the players in the Indian cement industry were privatesector organizations, the industry was highly regulated.With the rapid growth rate of the Indian economy after the 1990s, theinfrastructural developments within the country has been tremendous. The increasein the construction activities has led to the increase in the demand for updatedquality building materials and other allied products. Cement being one of the majorelements in the construction work, there is a growth in the cement industry in India.The consumption of cement has increased in India by nearly 7.5%. With theglobalization of Indian cement industry many foreign cement manufacturers are
  • 32. engaging themselves in agreements and deals with their India counter parts to havea share of the growth.Globalization of Indian Cement Industry includes several foreign companiesengaging in mergers and acquisitions of Indian cement companies, like• Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Companyentered into an agreement for a 50% joint venture with the IndoramaCement Ltd., situated in Mumbai, originally possessed by the Indorama SP Lohia Group. Heidelberg Cement Company is the leading Germancement manufacturing company. The Heidelberg Cement was set up in1873 and has a long and prosperous history. Being one of the best in theworld the Heidelberg Cement Company has its bases in differentcountries. The Heidelberg Cement Company has two manufacturing unitsin India. A grinding plant in Mumbai and a cement terminal nearMumbai harbor. A clinker plant is coming up in the state of Gujarat• Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signedan agreement of 14.8% take over with the Gujarat Ambuja Cements(GACL). With new products, skilled personnel, superb management, andan outstanding market strategy gives this tie up good edge over the othercompetitors. Holcim Cement Company is among the leading cementmanufacturing and supplying companies in the world. It is one of themajor employers in the world; having a work force of 90,000.The HolcimCement Company has units in excess of 70 countries all over the world.• Italcementi cement - Zuari Cement Limited Italcementi Cement Companywith the help of the Cements Français, a subsidiary for its global activities,has acquired shares of the famous Indian cement manufacturer - ZuariCement Limited. The acquisition was of 50% shareholding and the dealwas of about 100 million Euros. Italcementi Cement is the 5th largestcement manufacturing company in the world. The production capacity ofthe Italcementi cement company is about 70 million tons in a year. Withthe construction boom in India the company looks for a stable future. In2001 the Italcementi cement entered the Indian market scenario. It took
  • 33. over the plant of the Zuari Cement Limited in Andhra Pradesh insouthern India. The joint venture earned revenues of around 100 millionEuros and an operating profit of 4 million Euros.• Lafarge India is the subsidiary of the Lafarge Cement Company of France. Itwas established in 1999 in India with the acquisition of the Tisco and theRaymond cement plants. Lafarge Cement presently has three cementmanufacturing units in India. One of them is in Jharkhand which is usedfor the purpose of grinding and the other two are in Chhattisgarh used formanufacturing. The Lafarge Cement Company was set up in the year 1833by Leon Pavin. Lafarge Cement Company situated in France is the leadingcement producing company in the world. It has plans for increasing thecement production through technological innovations and maximizationof the capacity of the plant. It has a large network of distributors in theeastern part of India. The Lafarge Cement Company is presentlyproducing nearly 5.5 million tons of cement for the Indian cement market.STRUCTURE OF THE INDIAN CEMENT INDUSTRY• It is a fragmented industry. There are 59 cement companies in India,operating 183 large and 365 mini plants, where majority of the productionof cement (90%) in the country is by large plants (40).• One of the other defining features of the Indian cement industry is thatthe location of limestone reserves in select states has resulted in it’sevolving in the form of clusters.• Since cement is a high bulk and low value commodity, competition is alsolocalized because the cost of transportation of cement to distant marketsoften results in the product being uncompetitive in those markets.• Another distinguishing characteristic comes from it being cyclical innature as the market and consumption is closely linked to the economicand climatic cycles. In India, cement production is normally at its peak inthe month of March while it is at its lowest in the month of August and
  • 34. September. The cyclical nature of this industry has meant that only largeplayers are able to withstand the downturn in demand due to theireconomies of scale, operational efficiencies, centrally controlleddistribution systems and geographical diversification.Cement Capacity, Production and Utilization in India -In India, after the adaption of price decontrol policy for cement industry, ithas been showing phenomenal growth since early 1980s. In 1950-51 the capacity was3.28 MT. And surged to a capacity of 296.48 MT in 2010-11. Similarly, production ofcement increased from 2.20 MT in 1950-51 to 216.28 MT in 2010-11. Capacityutilization, which was 92 % during 1955 -56, gradually decreased to 66.83 % in 1980– 81 and later it took reverse direction in the eighties and started increasing slowly.The capacity utilization in the year 2010-11 is 73 %.Year Capacity (M.T) Production(M.T.)CapacityUtilization (%)1950-51 3.28 2.2 671955-56 5.02 4.6 921960-61 9.3 7.97 861965-66 12 10.97 911973-74 19.76 14.66 741978-79 22.58 19.42 861984-85 42 30.13 721989-90 61.37 45.42 741996-97 105.26 76.22 722001-02 145.99 106.9 732006-07 177.83 161.66 912007-08 209.4 172.31 822008-09 230.61 185.61 802009-10 276.77 204.95 74
  • 35. 2010-11 296.48 216.28 731950-511955-561960-611965-661973-741978-791984-851989-901996-972001-022006-072007-082008-092009-102010-1105010015020025030035001020304050607080901003.285.029.31219.7622.584261.37105.26145.99177.83209.4230.61276.77296.482.24.67.9710.9714.6619.4230.1345.4276.22106.9161.66172.31185.61204.95216.2867928691748672 74 72 739182 8074 73Capacity (M.t.) Production (M.t.) CapacityUtilization (%)`The industry saw significant capacity additions during the year 2008 to 2011.Overall, Cement demands not been able to keep pace with the additional supply inthe market. Although the pace of capacity additions has slowed down considerably,the demand-supply mismatch that has already been created in certain regions maycontinue for few quarters thereby affecting cement prices and realizationsTYPES OF CEMENT -The types of cement in India have increased over the years with theadvancement in research, development and technology. The Indian cement industryis witnessing a boom as a result of which the production of different kinds of cementin India has also increased.Ordinary Portland cement (OPC) -
  • 36. This type of cement is manufactured in the form of different grades, the mostcommon in India being Grade-53, Grade-43, and Grade-33. OPC is manufactured byburning siliceous materials like limestone at 1400 Degree Celsius and thereaftergrinding it with gypsum. OPC gives enough comprehensive strength after soakingin water for 3 days, 7 days, and 28 days. This is suitable for all types of modern civilengineering construction.Portland Blast Furnace Slag Cement -Blast furnace slag, which is a waste product of the pig iron furnace, can beused to produce slag cement. However, blast furnace slag does not havecementitious properties if it is cooled slowly and ground finely; hence, it is cooledquickly or quenched and subsequently ground to acquire cementitious properties.The quenching process is called "granulation", and the slag is known as granulatedblast furnace slag. Granulated blast furnace slag is mixed with lime or OPC clinkerand ground to form slag cement. Portland blast furnace slag cement (PBFSC) is themost widely used slag cement, and contains 25-65 percent of slag, 5-6 percent ofgypsum and Portland cement clinker. Apart from having OPC properties, PBFSChas other properties such as lower heat of hydration and higher sulphate resistance.Super sulphate cement, another type of slag cement, is prepared by grindinggranulated slag, anhydrite and clinker in the proportion of 70:15:15. This cement ismore sulphate-resistant than PBFSC or SRC.Portland Pozzolana Cement (PPC) -It is greyish in colour and made by grinding of lime stone and clay. Burningof lime stone and clay at very high temperature and cooling the resultant product iscalled clinker, grinding the clinker with of gypsum in ball mill to a finally groundpowder. This is known as Portland cement. This cement is produced by adding 10 –25 % pozzolanic materials to the OPC clinker then grinding together. PPC ismanufactured by blending pozzolanic materials, OPC clinker, and gypsum eithergrinding them together or separately. Today PPC is widely in demand for industrialand residential buildings, roads, dams, and machine foundations.Rapid Hardening Portland cement (RHPC) -
  • 37. RHPC is a type of cement that is used for special purposes when a faster rateof early high strength is required. RHPC has a higher rate of strength developmentthan the Normal Portland Cement. This type of cement gives the desired strength in3,7 and 28 days, if soaked in water. But sometimes cement is required high strengthin 24 hours as is given by ordinary Portland cement at 3 days. This sets and hardensmuch quickly than ordinary Portland cement.Low Heat cement -This type of cement is used for larger mass concrete works in dams, piers etc.It is necessary to have a much lower heat of hydration, so that chances of developingcontraction cracks are minimized. This can be done either by adding somepozzolanic material and granulated blast furnace slag to the cement while grindingor by changing the chemical composition of the cement.Hydrophobic Cement -It is obtained by adding water repellent firm forming substance such asStearic Acid and Oleic Acid by grinding Portland Cement Clinker. This type ofcement reduces wetting ability of cement grains. Hence it impact more time formixing transporting compacting & finishing etc.White Cement -White Cement has registered growth in production and sale in India in thelast few years. The white cement sector has been growing at the rate of 11 % peryear. This has given the Indian cement industry a major boost. White cement isPortland cement made from specially selected raw materials, usually pure chalk andwhite clay, containing very small quantities of iron oxides and manganese oxides.The chemical complexes formed with iron oxide present in the cement raw meal giveOPC cement its grey colour. However, if the proportion of iron oxides is reduced toless than 0.4 percent, cement becomes white in colour. Iron oxide improves theburning of raw meal. It can be used in all types of construction where OPC is used.However, its usage is limited, as it is more expensive than OPC.Sulphate Resistance Portland cement -
  • 38. Sulphate Resisting Portland Cement (SRPC) is type of Portland cement inwhich the quantity of tricalcium aluminates is less than 5 % of C3A. It can be usedfor purposes wherever PPC, Slag cement, and OPC are used. The use of PortlandSulphate Resisting Cement has proved beneficial, particularly in conditions wherethere is a risk of damage to the concrete from sulphate attack. SRPC is recommendedin places where the concrete is in contact with the soil, ground water, exposed toseacoast, and sea water. In all these conditions, the concrete is exposed to attack fromsulphate that is present in excessive amounts, which damage the structure.Quick Setting Cement -The percentage of gypsum added is reduced, which accelerate the settingaction of this cement is very fast. This type of cement is used for the underwaterconstruction where pumping is involved.Oil Well Cement (OWC) -As the name suggests, is used for the grouting of the oil wells, also known asthe cementing of the oil wells. This is done for both, the off-shore and on-shore oilwells. As the number of oil wells in India is increasing steadily, the sales of Oil WellCement have also increased. This has boosted the India cement industry to a largeextent.OWC is manufactured from the clinker of Portland cement and also fromcements that have been hydraulically blended. OWC can resist high pressure as wellas very high temperatures. OWC sets very slowly because it has organic retarderswhich prevent it from setting too fast.Clinker Cement -The cement industry in India is highly technologically intensive and as aresult, the quantity of clinker cement that is produced in India is of a very high gradeand is often considered among the best in the world. The production of clinkercement requires a lot of energy because it needs to be manufactured at thetemperature of round 1400-1450 degree celsius.Expansive Cement/ Shrinkage Compensated Cement -Concrete prepared from Portland cement or blended cement shrinks onsetting and hardening. Cement should expand on setting and hardening when it is
  • 39. used for pre – stressed, pre-fabricated concrete products and as a grout for fillingcracks. This cement is prepared by increasing the proportion of gypsum andaluminous cement clinker to Portland cement clinker while grinding.Super high strength cement -This type of cement is required for urgent repairs of important concretestructures like foundation pillars. It is prepared in jet mills by finely grindingportland cement clinker with higher proportion of tricalcium silicate.Trends in Variety wise cement production -Year OPC PPC PBFS SRC IRSC 40 Others TotalVIII Plan1992-93 36.47 8.33 5.37 - - 0.55 50.7271.91% 16.42% 10.59% - - 1.08%1993-94 38.69 9.24 5.3 0.03 0.01 0.82 54.0971.53% 17.08% 9.80% 0.06% 0.02% 1.51%1994-95 41.18 10.69 5.83 0.22 0.05 0.38 58.3570.57% 18.32% 9.99% 0.38% 0.09% 0.65%1995-96 45.04 11.77 7.10 0.25 0.05 0.32 64.5369.80% 18.24% 11.00% 0.39% 0.08% 0.49%1996-97 48.45 13.60 7.33 0.20 0.08 0.31 69.9869.25% 19.43% 10.48% 0.29% 0.11% 0.44%IX Plan1997-98 54.30 14.48 7.45 0.19 0.06 0.26 76.7470.76% 18.87% 9.71% 0.24% 0.08% 0.34%1998-99 57.40 15.57 8.21 0.21 0.06 0.22 81.6717.28% 19.07% 10.05% 0.26% 0.07% 0.27%1999-00 62.76 21.30 9.39 0.15 0.17 0.44 94.21
  • 40. 66.26% 22.61% 9.97% 0.16% 0.18% 0.45%2000-01 58.06 24.50 10.34 0.13 0.30 0.28 93.6162.26% 26.17% 11.05% 0.14% 0.32% 0.30%2001-02 57.68 32.29 11.89 0.12 0.25 0.17 102.4056.32% 31.53% 11.61% 0.12% 0.25% 0.17%X Plan2002-03 56.05 43.08 11.63 0.11 0.33 0.15 111.3550.34% 38.69% 10.44% 0.10% 0.29% 0.14%2003-04 53.51 52.12 11.26 0.12 0.40 0.09 117.5045.54% 44.36% 9.58% 0.10% 0.34% 0.08%2004-05 55.97 60.23 10.73 0.13 0.44 0.07 127.5743.88% 47.21% 8.41% 0.10% 0.35% 0.05%2005-06 55.84 74.01 11.37 0.09 0.43 0.07 141.8139.38% 52.19% 8.02% 0.06% 0.30% 0.05%2006-07 48.58 93.57 12.85 0.07 0.52 0.07 155.6631.21% 60.12% 8.25% 0.04% 0.34% 0.04%XI Plan2007-08 42.84 111.21 13.57 0.04 0.58 0.08 168.3225.46% 66.07% 8.06% 0.02% 0.34% 0.05%2008-09 45.05 120.79 15.18 0.08 0.44 0.07 181.6124.80% 66.51% 8.36% 0.04% 0.25% 0.04%Note: Others include – Oil well, low heat, silicate, silver, GPC.
  • 41. Production of different varieties of cement for the year April 2010 – March 2011 as apercentage to total is as given -Type of Cement % of Total ProductionOrdinary Portland Cement 32.26Portland Pozzolona Cement 60.79Portland Blast Furnace slag Cement 6.6Sulphate Resistant Cement 0.07IRS T40 0.24The type of cement that is manufactured in huge quantity is the Portland PozzolonaCement (PPC) which accounts for about 61% of the total cement manufactured.Ready Mix Concrete (RMC) -RMC is a mixture of cement, aggregate, water and other ingredients, whichare weighed and batched at a centrally located plant and directly placed at theconstruction site without undergoing any further treatment. The operations arecarried in factory like conditions and are completely automated. Hence, RMC is avalue-added, semi-finished product and results in superior quality concrete.Factors Delaying Entry/Growth of RMC in India -• RMC is highly mechanized activity and entails initial high cost especially dueto import of basic equipment and machinery.• Smaller size of construction in unorganized sector highly competitive and costconscious.• Availability of abundant cheap labour for making and transporting concrete.• Differential taxation between RMC and SMC. Especially before 1997 whenexcise duty @16 % also existed.Advantages -• Assured and Uniform Quality of concrete.
  • 42. • Speedier construction through mechanised operations• Need for ordering and storing cement, aggregates and sand on site totallyeliminated• Lower labour and supervisory costs• Minimisation of cement wastage through bulk handling and storage.• Cleaner working environment.• Eco-friendly productManufacturing Technology Status -Raw material Preparation Process – Currently mining is generally done with semi-mechanized methods. Computerized mine lining is now being used by few modernplants. Most of the crushing operation is performed with multistage crushers ofsmall capacity. New plants are now shifting to single stage impact crushers.Transportation of the material from the mines is generally with dumpers. Some ofthe plants are now shifting to belt conveyors using in pit crushing. Grindingtechnology has progressed from the use of open circuit ball mills to close circuit ballmills with high efficiency separators and improved mill internals. Vertical rollermills have now firmly established themselves for these operations. Use ofcomputerized on line X-ray analyzers for raw mix optimization has become anessential feature for modern plants.Burning Process – All plants commissioned after 1970 have been on dry processkilns. From conventional 4-stage pre heater kiln system the current trend has beentowards New Suspension Pre heater (NSP) kilns with pre calcinatory having 5-stgepre heater systems. Of the total capacity 44 % is accounted by NSPO kilns, 25 % bySP kilns, and 16 % by long wet process kilns and balance by other. Most of themodern plants have now adopted computerized kiln control system with few ofthem having gone for expert systems.
  • 43. Clinker Grinding – Currently most of the plants are using lose circuit ball mills forcement grinding with mechanical separators. Many are shifting to high efficiencyseparators, improved mill internals and modified flow control diaphragms.Present Status of Technology of Indian Cement Industry -Pre 1970 Plants 1970-90 Plants 1990 onwardsPlantsGlobalTechnologyMining &MaterialHandlingConventional Conventional Computer aidedandsurface minersComputer aidedandsurface minersCrushing Two stage Two stage Two stage in-pitcrushing&conveyingIn-pit crushing &conveyingLimestoneConveyingDumpers/Ropeway/TippersBelt conveyors Belt conveyors,Pipe conveyorsPipe conveyorsBelt conveyorsGrinding Ball millswith / withoutConventionalclassifierBall mills,VRMs,Roller presseswithstatic/dynamic classifierBall mills withimprovedclassifier, VRMs,Roll presses, withconventional anddynamic classifierBall mill withimprovedclassifier, VRMs,roll presses, horomills withdynamic classifierPyro processing Wet- single channelburnerWetSemi dryDry- 4 stage preheater-conventionalcooler- singleDry-5/6 stage preheater-high efficiencycooler-multi channelburner-co-generation ofDry-5/6 stage preheater- High efficiencycooler- Multi channelburner-lownox calciner
  • 44. channelburnerpower-co processing ofWDF-co-generation ofpower-co-processing ofWDF-low NO x/SO2emissiontechnologiesBlending &StoragePre-blendingBatch blendingsilospre-blending -continuousblending-multi chambersilos-continuousblending-multi hampersilos dome silosPacking &DispatchBag Bag Bag/Bulk BulkPalletizing &Shrink WrappingProcess Control Relay logic/Hard WiredFuzzy logiccontrolSystemMicro processorbased DDCNeurofuzzy expertsystemMicro processorbased DDCNeurofuzzyexpert systemPlant size, TPD 300-600 600-3000 3000-12000 6000-12000Inputs of Cement -• Lime stone• Coal• Power• Transportation
  • 45. Lime stone – It is the basic raw material for producing cement. Approximately 1.5 –1.6 tonnes of lime stone are required for making one tonnes of cement. Generallylimestone is available of an average size of about six inches and after feeding into thecrusher its sizes is reduced into small chips of half an inch. Since, the plants nearlimestone deposits pay less transportation cost than others; the location of cementplant is determined by the location of limestone mines. The total limestone depositin the country is estimated to more than 90 billion tonnes, with Andhra Pradeshenjoying the largest share of 34%, followed by Karnataka (13%), Gujarat (13%),Madhya Pradesh (8%) and Rajasthan (6.5 %).Coal – In the manufacturing of cement coal is important input as it has a dualfunction. It is a fuel and raw material and the consumption of coal in a typically dryprocess system ranges from 20-25 % of clinker production. This means for per tonclinker produced 0.20-0.25 ton of coal is consumed. The cement industry consumesabout 10 million tonnes of coal annually and is the fourth largest user of coal aftersteel, power and railways. Since coalfields like Bharat Coking Coal Limited (BCCL),Central Coalfields Limited (CCL) supply poor quality coal, the industry has to blendhigh-grade coal with it. However, non-coking coal and petroleum coke attracts acustoms duty of 5%, which increases the cost of production in the sector.Power – Cement industry consumes about 5.5 billion units of electricity annuallywith one tonne of cement requiring approximately 120-130 units of electricity. Sincestate governments supply electricity in India and since different states have differenttariff structure, the power tariffs vary according to the location of the plant and onthe production process. Most of the cement producing states such as AndhraPradesh, Madhya Pradesh, Gujarat experience power cuts to the tonnes of 25-30 %every year causing substantial production loss.Transportation – Transportation influences cement production directly as both itsinput materials and output have to be transported to and from the plants. Cement ismostly packed in paper bags now. It is then transported either by rail or road. Roadtransportation beyond 200 kms is not economical therefore about 55 % cement iscarried by the railways. Due to the inadequate of wagons there is a need to
  • 46. encourage transportation through sea. Today, 70 % of the cement movementworldwide is by sea compared to 1 % in India.CEMENT MANUFACTURING PROCESS-
  • 47. There are two general processes for producing clinker and cement in India – adry process and a wet process. In general, the dry process is much more energyefficient than the wet process, and the semi-wet somewhat more energy efficientthan the semi-dry process. The semi-dry process has never played an important rolein Indian cement production. Over the last decade, increased preference is beinggiven to the energy efficient dry process technology so as to obtain a cost advantagein a competitive market. Moreover, since the initiation of the decontrol process,many manufactures have switched over from the wet technology to the drytechnology by making suitable modifications in plants. Due to new, even moreefficient technologies, the wet process is expected to be completely phased out in thenear future. In 1960, around 94% of the plants in India used wet process kilns. Thesekilns have been phased out over the past 46 years and at present, 97 % of the kilnsare dry process, 2 % are wet, and only 1 % are semi-dry process.dry process kilns aretypically larger, with capacities in India ranging from 300-8,000 tonnes per day ortpd. While capacities in semi-dry kilns range from 600-1200 tpd, capacities in wetprocess kilns range from 200-750 tpd.Process Wise Capacity in Indian Cement Industry (%) -Year WetProcessDryProcessSemi-wetProcessTotal1950-51 97 0 3 1001960-61 94 1 5 1001970-71 69 22 9 1001980-81 61 33 6 1001990-91 17 81 2 1001991-92 16 82 2 1001992-93 16 82 2 1001993-94 12 86 2 1001994-95 12 86 2 100
  • 48. 1995-96 11 87 2 1001996-97 9 89 2 1001997-98 7 91 2 1001998-99 7 91 2 1001999-00 5 93 2 1002000-01 4 94 2 1002001-02 4 94 2 1002002-03 4 94 2 1002003-04 3 95 2 1002004-05 3 96 1 1002005-06 3 96 1 1002006-07 2 97 1 100
  • 49. Dry Process – In dry process production, limestone is crushed to a uniform andusable size, blended with certain additives such as bauxite, iron ore and dischargedon to a vertical roller mill where the raw materials are ground to fine powder. Anelectrostatic precipitator deducts the raw mill gases and collects the raw meal for aseries of further stages of blending. The homogenized raw meal thus extracted ispumped to the top of pre heater by air lift pumps. In the pre heaters the material isheated to 750 degree celsius. Subsequently, the raw meal undergoes a process ofcalcinations in a pre calcinatory. The remaining calcinations and clinkerizationreactions are completed in the kiln where the temperature is raised to 1,450 – 1,500degree celsius. The clinker formed is cooled and conveyed to the clinker silo fromwhere it is extracted and transported to the cement mills for producing cement. Forproducing OPC, clinker and gypsum are used and for producing PPC, clinker,gypsum and fly ash are used.Wet Process – The wet process differs mainly in the preparation of raw meal wherewater is added to raw materials to produce slurry. The chemical composition iscorrected and the slurry is then pumped to the kiln where evaporation of moisture,preheating, calcinations and sintering reaction takes place. The clinker is cooled andtransported, as in the ase of other plant, with suitable conveyors to cement mills forgrinding. The wet process is more energy intensive. And thus becomes expensivewhen power and energy prices are high.MAJOR PLAYERS IN THE INDIA:TOTAL SALES for the year 2013 = Rs. 73600.81 CrName of theCompanyNet Sales inCr. (2013)Percentage(%)UltraTech Cem. 18270.69 24.82ACC 11,357.96 15.43Ambuja Cem. 9730.30 13.22Shree Cement 5866.51 7.97Prism 4503.11 6.11India Cement 4203.40 5.71Madras 3273.57 4.44J K Cements 2544.96 3.45Birla Corpn. 2289.46 3.11
  • 50. Chettinad Cement 2059.90 2.79HHI = 1211.415HHI indicates moderate concentration that implies the size of the firm inrelationship to the overall cement industry in India is medium.Herfindahl-Hirschman Index (HHI)The H index is a far more precise tool for measuring concentration. Named aftereconomists Orris C. Herfindahl and Albert O. Hirschman, it is an economic conceptwidely applied in competition law, antitrust and also technology management. It isobtained by squaring the market-share of each of the players, and then adding upthose squaresThe formula for this index is:Where,H = Herfindahl Index.si = Contribution of each individual firm to Industry sales.n = Number of firms
  • 51. Here %S stands for the percentages of the market owned by each of the largercompanies, so that %S1 is the percentage owned by the largest company, %S2 by thesecond, and so on. "n" stands for the total number of firms you are counting.It can range from 0 to 10,000, moving from a huge number of very small firms to asingle monopolistic producer. Increases in the Herfindahl index generally indicate adecrease in competition and an increase of market power, whereas decreasesindicate the opposite.• A HHI index below 0.01 (or 100) indicates a highly competitive index.• A HHI index below 0.1 (or 1,000) indicates an unconcentrated index.• A HHI index between 0.1 to 0.18 (or 1,000 to 1,800) indicates moderateconcentration.• A HHI index above 0.18 (above 1,800) indicates high concentrationSourcingCementitiousMaterials(mineralcomponents)Others
  • 52. (sand, Gravel,Stone,RecycledAggregatesProcessingCement &AlliedAggregatesManufacturingCementRMC*ClinkerMorterAsphaltConcreteTransactionalChannelSellingDirect SalesTradersWholesalersRetailersEndUsersContractorsMasons/SelfBuildersCivil EngineersApplicationsInfrastructureHousingCommercial/IndustrialValue chain of the Cement Industry –
  • 53. Source: IMaCS analysis; *Ready Mix ConcreteRegional Analysis -
  • 54. 6%3%79%4%1%1%6%Northern Region - Capacity - 2010-11Mahayana/HaryanaPunjabRajasthanHimachal PradeshDelhiJammu & KashmirUttarakhandCement beinglargely a regional play with the industry divided into five main regions (Eastern,Southern, Western, Northern and Central) with very high mount of freight charges.These high charges re due to the bulky nature and low value commodity,transporting it over long distances will require high technology products and it willbe uneconomical. As it is freight intensive industry, the segment is completelydomestic driven and exports account for very negligible percent of the total cementoff take.12%41%13%13%Region-wise Capacity - 2010-11Eastern RegionSouthern RegionWestern RegionCentral Region
  • 55. 49%36%15%1%Southern Region-Capacity-2010-11Andhra PradeshTamil NaduKarnatakaKerala1%6%3%12%22%16%40%Eastern Region - Capacity - 2010-11AssamMeghalayaBiharJharkhandOdishaWest BengalChattisgarh
  • 56. 27%73%Central Region - Capacity - 2010-11Uttar PradeshMadhya Pradesh61%39%Western Region - Capacity - 2010-11GujaratMaharashtra
  • 57. Southern region in the country is the biggest contributor in cementproduction with installed capacity of 96.56 MT. India has total capacity of 238.40 MT(excluding the ACC Ltd, having annual installed capacity 27.08 MT. and AmbujaCements Ltd having annual installed capacity of 25 MT.) As of 2010-11 comprised ofNorthern region 51.56 MT, Eastern Region 29.14 MT, Western Region 30.52 MT andCentral Region 30.61 MT. Rajasthan, Andhra Pradesh, Tamil Nadu, Madhya Pradeshand Gujarat are the prominent cement industry contributor states. The western andnorthern regions re generally has more demand than availability.Region wise break down of Capacity and Utilization -Region 2006-07 2007-08 2008-09 2009-10 2010-11Capacity (million tonnes)North 33.77 47.47 50.27 48.77 51.56East 25.34 28.98 31.28 27.09 29.14South 54.1 61.81 79.5 92.11 96.56West 29.27 32.17 32.72 28.62 30.52Central 25.3 27.64 27.64 26.01 30.61Grand Total 167.78 198.07 221.41 222.6 238.4Regional Capacity as % of TotalNorth 20.13% 23.97% 22.70% 21.91% 21.63%
  • 58. East 15.10% 14.63% 14.13% 12.17% 12.22%South 32.24% 31.21% 35.91% 41.38% 40.50%West 17.45% 16.24% 14.78% 12.86% 12.80%Central 15.08% 13.95% 12.48% 11.68% 12.84%All India 100.00% 100.00% 100.00% 100.00% 100.00%Growth Capacity (Y-o-Y)North 23% 6% -3% 5%East 13% 7% -15% 7%South 12% 22% 14% 5%West 9% 2% -14% 6%Central 8% 0% -6% 15%All India 15% 11% 1% 7%Region wise Utilization (%)North 95% 77% 82% 70% 74%East 87% 82% 83% 79% 79%South 93% 88% 75% 64% 61%West 93% 89% 87% 73% 71%Central 95% 91% 94% 96% 86%All India 93% 85% 82% 72% 71%Region2006-07 2010-11CapacityProductionConsumptionSurplusCapacityProductionConsumptionSurplusNorth 33.77 32.09 29.52 2.57 51.56 37.94 26.82 11.12East 25.34 22.08 23.98 -1.9 29.14 23.16 28.11 -4.95South 54.1 50.15 43.88 6.27 96.56 59.95 36.06 23.89West 29.27 27.28 28.25 -0.97 30.52 21.71 31.35 -9.64
  • 59. Central25.3 24.04 22.41 1.63 30.61 26.24 27.38 -1.14Total 167.78 155.64 148.04 7.6 238.4 169 149.72 19.28There exist regional surplus/shortages in the Indian cement industry. SouthIndia leads in both cement production & consumption followed by North India. Theoversupply is largely in the southern and northern regions and there is a supplyshortage in eastern & western regions. There is significant inter-regional movementof cement, which plays a crucial role in the regional demand supply dynamics. Mostof the cement movement across regions takes place from north to central, south towest, central to north and central to east.Cement Market Division in India -Limestone is the basic raw material needed for the manufacturing of cement.In India, limestone is found in abundance. The total limestone reserves in India areestimated to be approximately 95,623,07 million metric tonnes (MMT), of whichabout 32 % of total reserves are found in state of Andhra Pradesh itself. Cementindustry is the largest consumer of limestone in India, accounting for over 70-80% oftotal limestone that is mined out. For making cement, limestone with a minimumCaO content of 44% is necessary. Typically 1.4-1.5 million tonnes of limestone isrequired for producing 1 MT of clinker. Thus for a 1.0 MMT cement plant, assuredavailability of cement grade limestone reserves of the order of 50-60 MMT in theclose vicinity is vital.The Cement industry is fragmented into five different regions because of thefollowing reasons:• Bulky nature of cement and limestone (key ingredient in manufacturingcement) makes it very hard to transport over long distances.• High freight costs involved in transportation of these commodities.• A cement plant is generally located near limestone deposits and cementproduced in a particular region is mainly consumed in that region.
  • 60. Place of concentration of large cement plants & their Capacity –The following table gives company wise Annual Installed CapacitiesCompany Plant No. ofPlantsAnnualinstalledCapacity(milliontonnes)ACC Ltd. Chaibasa, Chanda, Jamul, Kymore, Lakheri,Thondebhavi, Madukkarai, Sindri, Wadi I &II, Gagal I & II, Damodr cement works,Tikaria (G), Bargarh cement works,Kudithini.17 28.68Birla Corp, Ltd Birla Vikas & Satna, Birla Cement &Chanderia, Durgpur (G), Rae Bareli (G),Durga Hitech (G)7 5.78CCI Ltd. Adilbad, Akaltara, Bokajan, Charkhi-Dadri,Kurkunta, Mandhar, Neemuch, Rajban,Tandur, Delhi (G)10 3.85Andhra Cements Vizag (G), Nadikude–Durga Cement 2 1.42J.K. Group Nimbaher, Mangrot, Gotn, Muddapur,Lakshmi Cement, Lakshmi cement – Kalol(G)6 12.27Century Textiles Century Cement, Maihar Cement, ManikgarhCement3 7.8India Cement Sankarnagar, Sankaridurg, ChilamkurWorks, Dalavoi, Visaka Cement, Yerraguntla,Raasi Cement, Vallur(G), Parli(G), TrinetraCement10 15.85Tamilnadu Cement Alangulam, Ariyalur 2 0.9
  • 61. Madras Cements Ramasamyaraja Nagar, Jayantipuram,Alathiyur works I & II, Ariylur,Uthiramerur(G),Salem(G),Kolaghat(G)7 12.72Mehta Group Saurashtra Cement, Gujarat Sidhee Cement 2 2.7HMP Cements Ltd Porbandar, Shahabad 2 0.67Ultra Tech CementsLtdRajashree, Hotgi(G), Vikram, Aditya I & II,Rawan, Reddipalyam, CW, JCW(G), HCW,Gujarat, APCW-I & II, Jafrabad, Magdalla(G),Ratnagiri(G), ARCW(G), Bhatindia(G),WBCW(G), Dadri(G), Panipat(G),Ginigera(G), Kotputli, Aligarh(G)22 48.75Ambuja CementsLtd.Ambuja Cement, Gajambuja Cement,Ambuja Cement – Himachal Pradesh,Ropar(G), Rabriyawas, Bhatindia (G),Maratha Cement, Ambuja cementRoorkee(G), Bhatapara, Sankrail(G),Magdella(G), Farakka (G)13 27.35Jaypee Cement Ltd. Jaypee Rewa, Bela, Sadva Khurd (G),Ayodhya (G), Dalla, Wanakbori (G),Roorkee(G), Bagheri, Bhilai Jaypee13 22.95Kesoram Industries Kesoram Cement, Vasvadatta Cement 2 7.25Mangalam Cement Mangalam Cement, Neer Shree Cement 2 2Orient PaperIndustriesOrient Cement, Orient Cement-Jalgoan(G) 2 5Penna Cement Penna Tadippatri I & II, Penna Ganeshpahad,Penna-Boyareddypalli Ltd. Penna - Tandur4 6.5Prism Cement Prism Cement I & II 1 5.6Lafarge India(P) Arasmeta, Sonadh, Jojobera(G), Mejia(G) 4 6.55
  • 62. Ltd.Malabar Cements Malabar Cements, Malabar Cements(G) 2 0.62Binani Cement Binani Cement Sirohi, Binani CementSikar(G)2 6.25Rain cements Ltd. Rain Comdt. Unit I, Rain Comdt. Unit LN-1& LN-22 4KCP Ltd. KCP Ltd – Macherla, Maktyala 2 2.35OCL India Ltd OCL India-Rajgangpur, OCL India-Kapilas(G)2 5.35Dalmia Cements Dalmia-Dalmiapuram, Kadapa, Ariyur 3 9Cement Manu Co.LtdCement Manu Co. Ltd, Megha T&E(p) Ltd(G) 2 1.27Chettinad Cement Chettinad – Karur, Karikkali, Ariyalur 3 10.5Zuari Cement Ltd Zuari Cement, Sri Vishnu Cement 2 3.4Heidelberg CementLtdHCIL- Ammansandra, Damoh, Jhansi(G),Dolvi(G)4 3.1Shree Cement Shri-Beawar, Ras, Khushkhera(G),Suratgarh(G), Roorkee(G), Jaipur(G)6 13.39Others* Shree Digvijay-Sikka, Khyber Lnds. (P) Ltd,Lemos Cement, Kistna, Bagalkot Cement &Ind. Ltd, J&K Ltd, Kalyanpur Cement, KCPLtd, Mawmiuh Cherra, Panyam Cements,Sone Valley, Meghalaya Cements Ltd,Shriram Cements, Sanghi Industries Ltd, Myhome Industries, Meghalaya Cements Ltd,Anjani Portland Cements12 11.29Grand Total 171 294.43Source: Indian Minerals Year Book-2011, Part-II, 50thedition. * In addition, the following plants producedwhite cement – (1) Grasim Industries Ltd, Kharia, Khangar, Jodhpur district, Rajasthan (560000 tpy). (2).J.K.
  • 63. White cement works, Gotan, Nagapur district, Rajasthan (400000 tpy) and (3). Travancore Cements Ltd,muhmma, Alappuzha districu, Kerala (30,000 tpy).Capacity Trends Region-wise in India -2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P150170190210230250270290310330350All India Capacity TrendsYearCapacity(Mn.T.)9.18%CAGR
  • 64. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P2030405060708090North Region Capacity TrendsYearCapacity(Mn.T.)11.16%CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P050100150200South region capacity trendsyearCapacity(Mn.T.)15.58%CAGR
  • 65. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P262728293031323334Western Region Capacity TrendsYearCapacity(Mn.T.)1.05%CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P20222426283032343638Central region Capacity TrendsYearCapacity(Mn.T)4.88%CAGR
  • 66. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P202224262830323436Eastern Region Capacity TrendsYearCapacity(Mn.T)3.55%CAGRNew/Expansion Projects -1. Chettinad Cement has been expanding its plants, with new plants in NorthKarnataka and Andhra Pradesh. The companys expansion will increaseproduction capacity from 11.5 MTPA to an estimated 15 MTPA by 2015. Thecompany plans to construct an integrated cement unit with productioncapacity of 3.5 MTPA in Guntur District, as well as a 2 MTPA grinding unit inVisakhapatnam and also it is planning to open a 2.5 MTPA cement plant inKarnataka and a grinding unit in Sholapur, Maharashtra.2. Ambuja Cement plans to invest Rs. 2000 crore to enhance its cement capacitiesin Rajasthan and northern region and it will add 5 MT capacity to the totalcement production of India.3. Dalmia Cement plans to invest Rs 1800 crore to increase the companyscement manufacturing capacity over the next 2 years. The company also plansto set up a 2.5 MT Greenfield unit in Karnataka.
  • 67. 4. Heidelberg Cement has commissioned Phase-I of its Jhansi grinding unit. Thecompany currently executing its Rs 1400 crore expansion with the capacity of2.7 MT. The company also aims to accelerate the operational capacity at itsDmoh plant in Madhya Pradesh to 6 MT.5. India cements is planning to expand capacity at its Rajasthan unit, withpossible investment of Rs 650-700 crore. The present capacity of the plant is1.3 MT and the company is planning to add one more line with similarcapacity. India Cements current manufacturing capacity is 15.5 MT withplants in Tamil Nadu, Andhra Pradesh and Rajasthan.6. Vicat Group is likely to sell 4.5 million tonnes of cement in India. Apart fromthe newly-commissioned Rs 1800 crore joint venture cement plant, Vicat-Sagar Cement at Chattrasal, Gulbarga district of Karnataka, Vicat owns 51percent stake in Bharati Cement.7. Amrit Cement India Ltd (ACIL) is launching Amrut Cement in North-Easternmarket with production of 5 MT by 2015 through capacity addition i North-East and adding fresh capacities in Nepal and Bihar.8. Jindal Steel & Power is planning a cement manufacturing project inChhattisgarh with capacity of 2 MTPA and total estimated cost of Rs 6050millions.9. Shree Vinayak Cement Company belonging to the Sandhu group ofcompanies is planning to expand its grinding unit in Dhanbad, Jharkhandwith the cost of Rs 70 millions.10. Abhijeet Cement is planning an integrated cement project – Cement (2MTPA)and Captive power project (50 MW) in Madhya Pradesh.11. Gulbarga Cement (Zuari cement group) is planning an integrated cementproject – OPC/PPC/PSC cement plant (3.2 MTPA), Clinker plant (2 MTPA)and Coal bsed captive power plant with total estimated cost of Rs 16000millions.Production Region-wise Trends in India -
  • 68. The Indian cement industry currently supplies all most all the cementitious materialrequirements of the Indian market from its manufacturing plants within India.Cementitious materials include all types of cement and other materials sold tosupplement cement concrete.In 2012, the Industry• 183 large cement plants, over 365 mini cement plants and 42 players in theindustry.• Current Capacity 324 MTPA and operates at 75-80 percent utilization.2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P140145150155160165170175180185190All India Production TrendsYearProduction(Mn.T)2.08%CAGR
  • 69. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P253035404550North Region Production TrendsYearProduction(Mn.T)4.28%CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P1520253035Western region Production TrendsYearProduction(Mn.T)-5.55%CAGR
  • 70. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P4045505560657075Southern Region Production TrendsYearProduction(Mn.T)4.56%CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P202530Estern Region Production TrendsYearProduction(Mn.T)1.20%CAGR
  • 71. Consumption Region-wise Trends in India -Per Capita Consumption -
  • 72. 2006-072007-082008-092009-102010-112011-122012-13P2013-14P2014-15P140145150155160165170175180All India Consumption TrendsYearConsumption(Mn.T)1.32%CAGRchinaworldindia0 200 400 600 800 1000 1200 1400 16001390396156Per Capita Cement Consumption (in kgs)Indian cement industry an attractive investment destination with thecombination of a lower per capita consumption and a faster growth rate. The Indiancement Industry has registered a production of more than 100 million tonnes since2001-02. Despite having high demand in India. Per capita cement consumption isvery low, where the world average is 396 kg, in India being the country of young
  • 73. population has a huge potential and its ushering social & economic base willimprove the domestic consumption.2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P21222324252627282930Central region Production TrendsYearProduction(Mn.T)2.21%CAGR
  • 74. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P2025303540North region Consumption TrendsYearConsumption(Mn.T)-2.37 %CAGR
  • 75. 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12P2012-13P2013-14P2014-15P2022242628303234Eastern region Consumption TrendsYearConsumption(Mn.T)4.05 %CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P25272931333537Western region Consumption trendsYearConsumption(Mn.T)2.64%CAGR
  • 76. 2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P202530354045505560Southern Region Consumption TrendsYearConsumption(Mn.T)-4.79 %CAGR2006-072007-082008-092009-102010-112011-12P2012-13P2013-14P2014-15P202224262830323436Central region Consumption trendsYearConsumption(Mn.T)5.14 %CAGR
  • 77. Cement industry in India comprises of around 183 large cement plants with acombined installed capacity of around 318 MTPA and more than 365 mini cementplants. Large producers contribute about 90% to the installed capacity while miniplants account for the rest. Among these, 98% of the capacity is in the private sectorand the rest in the public sector. Maximum numbers of cement plants are located inAndhra Pradesh, which were 37 large cement plants with a total capacity of 68MTPA.Cement industry in India had made great progress in technological up-gradation and assimilation of latest technology presently, about 97 percent of thetotal capacity in the industry is based on modern and environment friendly dryprocess technology.Despite higher cement prices realized occasionally, the margins continue to beunder severe pressure particularly over the last couple of years due to steep hike incost of all major inputs like raw material, fuel, power and freight, which togetheraccount for around 70 percent of the cost of productionProjects -1. The public works Department (PWD) is to execute road development projectsacross Kerala in the next 3 years. The cost of the project is estimated to be Rs10,600 crore and involves construction of phase – II of the Kerala stateTransport project worth Rs 2,005 crore, Rs 3500 crore thiruvananthapurammodel road development project involving seven cities and construction of1,204 KM network worth Rs 5,100 crore.2. Godrej properties is going to launch a commercial project at Bandra – KurlaComplex in Mumbai, the project involves construction of a commercialbuilding at cost of Rs 2,000 – 2,500 crore and will be spread across 1.3 millionsquare feet. Godrej properties expect to complete the construction of thebuilding by 2015.3. The Union government cleaned 3000 km of new projects to the countrys sixprime states. The projects will be executed at Gujarat, Maharashtra, MadhyaPradesh, Uttar Pradesh and two north eastern states.
  • 78. 4. The Union government has sanctioned the construction of strategic borderroads in the Indo-China region. The project involves construction of 27strategic border roads at a cost of Rs 1937 crore.5. The central government has approved Rs 820 crore for developing roadnetworks in Assam. The project is being implemented under the PradhanMantry Gram Sadak Yogna (PMGSY) and involves construction of 689 KM ofroads and 347 bridges.6. The states of Andhra Pradesh and West Bengal are all set to get two new portprojects. The new ports will add capacity of 100 MT.DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRYDemand sourcesThe demand for cement in India has been influenced mainly by the Housing,Infrastructure, Irrigation, Roads and Defence. The following diagram shows thecontribution of the important demand driven factors:
  • 79. Housing 53.00%Infrastructure 15.00%Irrigation 23.00%Roads 5.00%Defense 4.00%Sector wise Demand ContributionDEMAND FROM RESIDENTIAL HOUSING SECTORHousing demand accounts for 53% of total cement demand and 90% of total realestate demand. Housing demand has supported the cement industry even in timesof low infrastructure or industrial demand.The growth in the residential real estate market in India has been largely driven byrising disposable incomes, a rapidly growing middle class, low interest rates, fiscalincentives on both interest and principal payments for housing loans and heightenedcustomer expectations, as well as increased urbanisation.A large proportion of the demand for houses, especially in urban centres such asMumbai, Bangalore, Delhi (Gurgaon, Noida), Hyderabad and Pune, is likely to comefrom high-rise residential buildings. Since this is a fairly new segment, the growth ofthe high-rise segment will be faster as compared to the growth of the urban housingsegment. The reasons for the construction of high rise apartment buildings are thelack of space in cities and proximity to offices and IT parks.• Growth Drivers
  • 80. o Favourable demography and higher disposable incomeo Continued growth in population and change in population profile.o Decrease in number of people per household with breakdown of the jointfamily system into nuclear families.o Fiscal incentives provided by Government and easy availability of finance.o Growth in Tourism.DEMAND FROM INFRASTRUCTURE SECTORThe Indian economy is all set to grow at a pace of over 7% in the current fiscal.Increased emphasis on infrastructure development made it achievable.Infrastructure has been witnessing extraordinary growth across all sectors such asroads, railways, irrigation, power, water supply urban infrastructure, ports andairports. However, in order to achieve this kind of growth on a sustainable basis, afurther impetus is required to be given to the Infrastructure development in thecountry. GOI, recognizing this fact has planned to spend around INR 73,793 croreson infrastructure development for the next five year.Out of total proposed expenditure, a construction activity are expected to accountfor more than 50% of total investment and is expected to be the biggest beneficiary ofthe surge in infrastructure investment over the next five years.This would imply a construction opportunity will more in the next 5 years. In lightof such huge expenditure on construction activities, the demand for cement frominfrastructure sector is expected to grow.DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTORCommercial construction comprises construction of office space, hotels, hospitals,schools, stadiums etc. In India, most of the investment in this segment is driven byoffice space construction. Within office space construction activity, almost 70-75 percent of the demand comes from IT/BPO/call centres. The other key demand driversinclude banking and financial services, FMCG and telecom.This dependency on IT/ITES is expected to continue due to India’s emergence as apreferred outsourcing destination, despite China and Russia also emerging as strong
  • 81. contenders. The industrial and commercial sector comprises of all the majorindustrial set ups, commercial offices, IT & ITES parks and organized retail formats.The increase in disposable incomes, demographic changes (such as the increasingnumber of working women, who spend more, the rising number of nuclear familiesand higher income levels within the urban population), the change in the perceptionof branded products, the growth in retail malls, the entry of international playersand the availability of cheap finance will drive the growth in organized retail.We expect cement consumption from this sector to register a CAGR of 9-10% drivenby large-scale construction activities.Details of PPP projects by Sector-Sector Projects in Pipeline Projects Under ImplementationNo. ofProjectsProjet Cost(Rs. Cr)No.ofProjectsProject Cost(Rs.Cr)Roads 167 115822 133 102775Ports 47 35902 50 62058Airports 7 4120 3 19277Railways 53 90312 5 5217Power 34 62032 15 29448UrbanInfrastructure65 45708 69 18690Other 31 22534 17 3575Total 404 376430 292 241040Overall DemandDriven by a strong residential housing demand, growing industrial and commercialactivities and the continued momentum in infrastructure investment, the cementconsumption is expected to witness a CAGR of more than 10% in line with theeconomic growth because of the strong co-relation with GDP and the increasedactivity in the construction sector. We further believe that due to huge expenditureby GOI on infrastructure the proportionate demand from infrastructure sector willmove northwards and we expect the total share of cement demand frominfrastructure will increase in coming years.
  • 82. DEMAND-SUPPLY MISMATCHThough India is the second largest cement manufacturer, it is among the lowestcement consuming countries. In India per capita cement consumption is 156 kg,which is far below the world average of approximately 396 kg. Hence, the cementindustry has been in a surplus position since a long time.There exist regional surplus/shortages in the Indian cement industry. Theoversupply is largely in the Southern and Northern regions. By contrast, there is asupply shortage in Eastern and Western regions. There is significant inter-regionalmovement of cement, which plays a crucial role in the regional demand-supplydynamics. Most of the cement movement across regions takes place from North toCentral, South to West, Central to North, and Central to East.MAJOR PLAYERS AND THEIR PERFORMANCES -ACC Ltd -ACC limited is a partner company of Holcim group and it is the best cementcompany and largest producer of cement in India. Also, ACC limited is a majorplayer in the area of ready mix concrete company. ACC limited has substantiallyheld the market leadership and they achieved the sales volume of 24.11 MT cementin the year 2012. Companys headquarter is located in Mumbai and has 16 cement
  • 83. manufacturing plants within the country with 21 sales offices and several zoneoffices employing more than 9000 people. The Mumbai based company is also thelargest user of limestone for its high volume operations in the field of mining.Dec08 Dec09 Dec10 Dec11 Dec12Net Sales 7229.97 8021.59 7647.77 9348.26 11357.96PAT 1177.38 1588.43 935.02 996.45 1086.42ProfitabilityTrend16.28% 19.80% 12.23% 10.66% 9.57%Dec08 Dec09 Dec10 Dec11 Dec120.00%5.00%10.00%15.00%20.00%25.00%16.28%19.80%12.23%10.66%9.57%ACC LtdProfitability TrendUltraTech Cement -Ultratech Cement is Indis largest cement company. Part of the Aditya BirlaGroup the company has annual capacity of 72 million tonnes. The company has anemployee strength of 133000 employees makes it one of the best employees in India.The employees belong to 42 nationalities from 36 countries. The company sells its
  • 84. white cement under the brand name of Birla White. The company the biggestmanufacturer of cements in India and 15 the biggest in the world.Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 5512.43 6385.5 7042.82 13205.64 18270.69PAT 1007.61 977.02 1093.11 1278.71 2394.67ProfitabilityTrend18.28% 15.30% 15.52% 9.68% 13.11%Mar08 Mar09 Mar10 Mar11 Mar120.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%16.00%18.00%20.00%UltraTech CementProfitability TrendAmbuja Cements -Ambuja Cement a company founded in 1983 by NarotamSekhsaria andSuresh Neotia. The company has five integrated cement plants and eight grindingunits across the country. The company is also a part of the Halcim Group and has acapacity to produce about 27 MT of cement per annum and is a benchmark forcement industries in India. The company has three captive terminals on the westcoast to timely deliver the order of the customers.Dec08 Dec09 Dec10 Dec11 Dec12Net Sales 6182.09 7083.21 7371.52 8473.14 9730.3
  • 85. PAT 1390.99 1198.25 1202.66 1158.5 1295.18ProfitabilityTrend22.50% 16.92% 16.31% 13.67% 13.31%Dec08 Dec09 Dec10 Dec11 Dec120.00%5.00%10.00%15.00%20.00%25.00%Ambuja CementProfitability TrendShree Cement -Shree cement is a well known company in the area of cement manufacturing.The beawar, Rajasthan based company is one of the biggest producers of cement inNorth India. The company has plants located in baewar, Ras, Suratgarh andKhsuhkhera and other places. The company has a different strategy, it sells itsbrands under different brand names such as Shree Ultra, Bangur and Rockstrong.The capacity of the company is around 13.5 MTPA. Shree cement also has 560 MWof installed power capacity, providing a steady stream of cash flows. Presently thecompany is planning to expand further at a similarly aggressive pace in presentregions of operations and new regions.
  • 86. Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 2108.21 2716.47 3628.2 3498.89 5866.51PAT 274.48 571.43 659.41 147.81 543.75ProfitabilityTrend13.02% 21.04% 18.17% 4.22% 9.27%Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Shree CementProfitability TrendPrism Cement -Prism cement plant is located at Mankhari in Satna district, which is largestsolitary kiln cement plant in the country. Company has earned the respect ofinvestors and potential growth in cement manufacturing made one of the top cementmanufactures in the country. The company produces excellent quality of cement andthus is a premium price segment company. The company is ISO certified and everyproduct manufactured by the company carries the BIS certification. The quality ofthe cement produced makes it a preferred choice in high-rise buildings, bridges,pipes, poles and manufacturing AC sheets.Jun08 Mar09 Mar10 Mar11 Mar12
  • 87. Net Sales 878.1 629.2 2835.38 3364.27 4503.11PAT 241.45 96.23 251.05 95.79 -30.01ProfitabilityTrend27.50% 15.29% 8.85% 2.85% -0.67%Jun08 Mar09 Mar10 Mar11 Mar12-5.00%0.00%5.00%10.00%15.00%20.00%25.00%30.00%Prism CementProfitability TrendIndia Cements -India cement is one of the oldest cement manufacturers in India and wasestablished in 1996 with first plant setup in 1940 in Sankarnagar, Tamil Nadu. Sincethen it has setup total 9 plants with a capacity to produce about 14 million tons ofcement per annum. With regional offices in all southern states and 3 plants in TamilNadu and 4 in Andhra Pradesh, the company is the largest producer of cement inSouth India.
  • 88. Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 3044.25 3358.34 3687.06 3413.29 4203.41PAT 637.55 432.09 354.33 68.11 292.98ProfitabilityTrend20.94% 12.87% 9.61% 2.00% 6.97%Mar08 Mar09 Mar10 Mar11 MAr120.00%5.00%10.00%15.00%20.00%25.00%India CementProfitability TrendMadras Cement -Madras Cements Limited is launched in 1961 and part of Ramco group, thecompany started production in 1962. The company has a plant at Alathiyur, TamilNadu. which is said to be the most modern plant in the country due to its 30.50 lakhtons per annum. The company is also one of the largest wind energy producers in
  • 89. the country. This has helped them to have an image of eco-friendly Company.Madras Cement has been very aggressive with capacity additions in the last fewyears, its cement capacities increased to 12.5 MTPA with a marginal capacity in EastIndia. While the company is not much efficient in terms of costs, it enjoys a verystrong brand franchise in the south, leading to higher realizations than most of thepan-India players operating in the south region. Unlike many of its peers, thecompany primarily focuses on the retail or individual house builder demand.Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 2005.32 2529.24 2807.18 2620.71 3273.57PAT 406.24 363.5 353.69 210.91 385.49ProfitabilityTrend20.36% 14.37% 12.60% 8.05% 11.78%Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Madras CementProfitability TrendJ.K.Cement -JK cement is among the top cement manufactures in India. It started thecement manufacturing in the year 1975 at Nimbahera in Rjasthan, since then it hastotal 4 grey cement plants with a capacity to produce 7.5 MTPA. JK cement is
  • 90. second largest white cement manufacturers after UltraTech with a capacity of 3 lackstons per annum. The company is one of the major exporters of white cement tocountries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka,Kenya, UAE and Nepal. The company has reserves of limestone to meet theirrequirements for the next 40 years.Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 1595.57 1664.42 2053.16 2361.35 2544.95PAT 265.26 142.44 219.56 36.49 197.3ProfitabilityTrend16.62% 8.56% 10.69% 1.55% 7.75%Mar08 Mar09 Mar10 Mar11 Mar120.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%16.00%18.00%J K CementProfitability TrendChettinad Cement -Chettinad Cement Corporation limited is established in 1962 to cater togrowing demand of cement in the country. The total cement manufacturing capacity
  • 91. of the company is 11 MTPA at its four units at Puliyur, Karikkali and Ariyalur inTamil Nadu and Chincholi Taluk in Karnataka. It has its own captive power plantsto cater its own plants.Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 933.38 1138.46 1368.74 1545.58 2059.9PAT 163.77 -4.21 96.63 75.17 188ProfitabilityTrend17.55% -0.37% 7.06% 4.86% 9.13%Mar08 Mar09 Mar10 Mar11 Mar12-5.00%0.00%5.00%10.00%15.00%20.00%Chettinad CementProfitability TrendMangalam Cement –Mangalam Cement is established in 1976 by Shri B.K.Birla and havingcommenced cement production in 1981. Being a part of B.K. Birla group ofcompanies has emerged as a leading integrated manufacturer of world class cementin North India.Mar08 Mar09 Mar10 Mar11 Mar12Net Sales 509.88 564.15 613.69 491.57 631.03PAT 111.67 96.77 116.61 42.57 55.99ProfitabilityTrend21.90% 17.15% 19.00% 8.66% 8.87%
  • 92. Mar08 Mar09 Mar10 Mar11 Mar120.00%5.00%10.00%15.00%20.00%25.00%Mangalam CementProfitability TrendIf we look at all the above companies’ performance, we can see that UltraTechCement, Shree Cement, India Cement, Madras Cement, J.K.Cement and ChettinadCement are performing well in comparison with other companies. There is anincrease in profitability trend when compared with the profits in the year 2012 and2011. Where there is a decrease or moderate growth in profitability trend for all theremaining companies when compared with the profits in the year 2012 and 2011.Indicator 2005 2006 2007 2008 2009 2010 2011Sales growth of cement 15.6 18.5 41.5 18.6 12.4 12.9 11.6
  • 93. companiesPAT growth of cementcompanies327.3 42.3 163.2 20.8 -12.4 14.7 -40.4PAT margin of cementcompanies6.5 9.6 17.8 17.8 14 14.3 7.4Source: CMIE database.Profitability of cement sector has considerably eroded in the last two yearswith a moderation in demand, low capacity utilization and increase in wages. As perthe above table, rate of growth of profit after tax turned negative in 2010-11 and aspercentage to income, this ratio declined from a peak of 17.8% in 2006-08 to 7.4% in2010-11.COST ANALYSIS –The energy costs and cement freight costs are the two most important elements inthe cost structure of a cement company. While, the share of power and freight costshas increased marginally in its share of total operating costs. The share of costs onaccount of material and other (repair and maintenance, employees and selling)expenses have more or less remained stable.Limestone- Due to limited resources of limestone, there are talks with NationalCouncil for cement and Building Materials (NCCBM) for R&D of GeopolymericCement which require some chemical bonding instead of Lime to avoid paucity oflime and soil erosion.Fly Ash & Slag- To reduce consumption of limestone and to conserve it, substitutesare being used like substitution of clinker by using fly ash and blast furnace slag.
  • 94. Utilization of fly ash procured from power plants and slag generated from steelplants reduces dust emission by 9800 tones/annum and CO2 emission by 33.6million tones/annum. Concerns have been raised for depriving to use own fly ashbeing produced by captive power plants of cement industry as cement industries arecompelled to supply 20% of their own fly ash to manufacturers of fly ash bricks, tilesetc.Fuels- To conserve fossil fuel energy resources and minimize the adverse impact ofglobal warming, co-processing of industrial waste like paint sludge, refinery sludge,plastic waste and tire chip, red-mud and other than industrial waste like rice huskand cow dunk are being used by cement manufacturers.Power- Cement industry has vast untapped potential for cogeneration of power bywaste heat recovery as 30-40% of total heat input is released as waste heat from exitgases. It is estimated that 4.4 MW of electricity can be generated from 1MTPAcapacity plant by waste heat recovery.Coal- Government has to take necessary steps to sufficient allocation of coal linkagesthrough fuel supply agreement (FSA) to cement manufacturers so as to avoid use ofpet coke as subsidiary and resorting to import of coal/pet coke. Presently twoindigenous coal suppliers of cement industries – Coal India Ltd. and SingareniColleries Co. Ltd. are supplying only 48% of total requirement due to this FSA andlinkage procedure of Ministry of Coal, obliging cement manufacturers to source theirfuel requirements from various other avenues.Fuel Requirements and Alternate Sources of EnergyFuelCoal continues to be the main fuel for the Indian cement industry and will remain soin the near future as well. The industry is mainly using coal from various coalfieldsin the country. It is also procuring coal through open market and direct imports.Lignite from deposits in Gujarat and Rajasthan is also being used by cement plants.Pet coke has also been successfully utilized by some cement plants, mainly inGujarat, Rajasthan and MP, thereby substituting main fossil and conventional fuelcoal up to 100% in some plants. In the recent past, waste derived fuels including
  • 95. hazardous combustible wastes have also been tried due to economic pressures incement manufacturing process owing to tough competition in domestic and globalmarkets as well as ecological reasons on account of waste disposal and co-processingin cement rotary kilns being most effective mode of waste treatment.Use of Industrial Wastes• Cement plants in India utilized about 19% of fly ash generated by powerplants and 100% of granulated slag generated by steel plants.• Recycling of Industrial wastes in manufacture of cement is highest in Japanfollowed by India.Use of Alternate Fuels• Use of hazardous and refuse derived combustibles and Municipal SolidWaste (MSW) as fuel is common in countries like Canada, EU, Japan andKorea, but regulations do not yet permit in India.• CPCB is actively engaged in plant level trials in respect of wastes viz. usedtyres, refinery sludge, paint sludge, Effluent Treatment Plant (ETP) sludgeand Toluene Di-Isocyanite (TDI) tar waste from petroleum industries and informulation of guidelines for use of these wastes as fuel by cement industry.PRICES -Cement price is not uniform throughout the country and varies from region toregion. Price of cement also depends on the distribution channel – whether it is sentdirectly to the project customer or through the dealers outlets. Segmentation enablesthe marketer to different market segments with separate price points rather thanserve the entire market with one price point. Amongst the constituent materials ofconcrete consumers are generally sensitive to change in cement price. When prices ofbuilding materials increase there is a strong resentment amongst the constructionalprofessionals when price of cement rise. Predicting change in prices of cement isdifficult as supply and demand of cement in a particular region greatly influencesprice. Input materials that go into the manufacture of cement are mainly controlledby the government and hence there is no scope for negotiation. Continuous supply
  • 96. of power and coal has been a constant challenge. For manufacture of 100 tonnes ofcement about 25 tonnes of coal is required. Coal which is normally imported fromother countries due to its high calorific value is dependent on rupee depreciation.Coal prices procured from government through relevant agencies are volatile. Mostimportantly pricing decisions has to be taken by taking into account the competitorsreaction to change in cement price.29Apr201301Apr201318Mar201304Mar201325Feb201304Feb201328Jan201307Jan201331Dec201203Dec201226Nov201205Nov201229Oct201201Oct201224Sep201203Sep201227Aug201206Aug201230Jul201209Jul2012150200250300350400450Cement - Average Wholesle Prices (Rs./50 kg)DelhiAhmadabadChandigarhChennaiHyderabadKolkataMumbaiDatePricesAll India prices at Rs 294/bag declined by ~Rs 4/bag or -1.3 percent m-o-m inMarch. Sharp decline seen in south India (-3.2 percent m-o-m) & central region (-2.8percent m-o-m) followed by east (-1 percent m-o-m).The regional variations in the Indian market has resulted in the cement pricescross regions witnessing movement within a band, with no appreciable increase in
  • 97. any region. Differences in regional demand supply situation have translated intoprice differences across regions.Prices are lower in southern regions (Hyderabad) where there is normally asupply surplus. However, prices are higher in Eastern (Kolkata) and western(Mumbai) regions where shortages exist.The cement companies are expected to continue facing the problem of risingmanufacturing costs, as thus do not have control on the external cost elements suchas energy and freight charges. Whereas earnings of the cement industry on anaggregate may improve, there may be selected players in the industry (viz. ACC Ltd,Ambuja cements, Ultratech Cement) show a relatively higher growth in earnings.This would include players, who increasingly focus on enhancing operatingefficiency, have high economies of scale, are not dependent on few regional markets,have good distribution logistics & possess a good brand name (viz. ACC Ltd,Ambuja cements, Ultratech Cement).Poor operating leverage and realization per bag of cement sold is likely to hitoperating margin and the cost per tonne. Large pan India companies may showweaker growth rate in both revenue and profit when compared with the pastperformance. Regional players, where shipment distances are relatively less, mayfare better.GOVERNMENT POLICIESGovernment policies have affected the growth of cement plants in India in variousstages. The control on cement for a long time and then partial decontrol and thentotal decontrol has contributed to the gradual opening up of the market for cementproducers. The stages of growth of the cement industry can be best described in thefollowing stages:• Price and Distribution Controls (1940-1981)During the Second World War, cement was declared as an essentialcommodity under the Defence of India Rules and was brought under priceand distribution controls which resulted in sluggish growth. The installedcapacity reached only 27.9 MT by the year 1980-81.
  • 98. • Partial Decontrol (1982-1988)In February 1982, partial decontrol was announced. Under this scheme, levycement quota was fixed for the units and the balance could be sold in the openmarket. This resulted in extensive modernization and expansion drive, whichcan be seen from the increase in the installed capacity to 59MT in 1988-89 incomparison with the figure of a mere 27.9MT in 1980-81, an increase of almost111%.• Total Decontrol (1989)In the year 1989, total decontrol of the cement industry was announced. Bydecontrolling the cement industry, the government relaxed the forces ofdemand and supply. In the next two years, the industry enjoyed a boom insales and profits. By 1992, the pace of overall economic liberalization hadpeaked; ironically, however, the economy slipped into recession taking thecement industry down with it. For 1992-93, the industry remained stagnantwith no addition to existing capacity.GOVERNMENT CONTROLSThe prices that primarily control the price of cement are coal, power tariffs, railway,freight, royalty and cess on limestone. Interestingly, government controls all of theseprices.EXCISE DUTY STRUCTURECement is highly taxed commodity in India (30 %) compared to 19 % in Chinaand almost negligible in Thailand. Excise duty on cement is currently being levied atmixed rates i.e. Ad valorem (on transaction value) plus specific (specific rate to becharged on the basis of MRP) and There is no import duty for import of cement intothe country. This tax anomaly puts domestic manufacturers at a disadvantage.Excise duty rates during Budget 2011-12Sl.No.Mini Cement Plant Duty Rate
  • 99. 1 All goods leared in packaged form -(i) Of retail sale price not exceeding Rs. 190 per 50kg bag or of per tonne equivalent retail sale priccenot exceeding Rs. 3800.(ii) Of retail sale price exceeding Rs. 190 per 50 kgbag or of per tonne equivalent retail sale priceexceeding Rs. 3800.(iii) All goods other than those cleared inpackaged form.10% ad valorem10% ad valorem + Rs. 30per MT10% ad valorem2 All goods cleared in packaged form -(iv) Of retail sale price not exceeding Rs. 190 per50 kg bag or of per tonne equivalent retail saleprice not exceeding Rs. 3800.(v) Of retail sale price exceeding Rs. 190 per 50 kgbag or of per tonne equivalent retail sale price notexceeding Rs. 3800.(vi) All goods other than those cleared inpackaged form.10% ad valorem + Rs. 80per MT10% ad valorem + Rs. 160per MT10% ad valorem3 Cement Clinker 10% ad valorem + Rs. 200per MTVAT – The rate of VAT charged on cement is 12.5 % even up to 15 % in some of thestates on cement and clinker.
  • 100. The Total government levies and taxes, which include Royalty on limestone,Royalty on Coal, Electricity duty, sales tax etc. Average tax on cement in the Asia-Pacific region is just 11.4 % with the highest levy of 20 % being in Sri Lanka.Sl.No. Item Rs./tonne ofcement1 Average Excise Duty 4902 VAT 5003 Royalty & Cess on Limestone 844 Royalty on Coal 335 Electricity Duty 236 Others including clean energy cess onFuel30Total 1160FINDINGS-• The cement manufacturing process may be divided into three classes’ i.e. wetprocess, semi-dry/semi wet process and dry process. The old cement plantsare based on wet process but the new plants invariably adopt the dry processexcept in rare cases where the raw materials characteristics may decide forwet or semi dry process. The dry process is very much superior in terms offuel economy. Due to this single main factor a number of older wet processplants are getting converted to dry process. All new capacity to be added infuture is likely to be of dry process and even some of the existing units mayalso change the process to become competitive. As such, the share of cementcapacity using dry process would further increase in future. The induction ofadvanced technology has helped the industry immensely to conserve energyand fuel and to save materials substantially.
  • 101. • Indian cement industry has also acquired technical capability to producedifferent types of cement like Ordinary Portland Cement (OPC), PortlandPozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oilwell Cement, Sulphate Resisting Portland Cement, White cement etc.• Selling and distribution of cement was under Government control sinceAugust 1942. In February 1982 the Government allowed partial decontrol ofcement and the same was in force till February 1989. Since then, under totaldecontrol announced by the Government in 1989, cement factories are free ofany control on sale and distribution of cement.• The cement industry in India has grown from an installed capacity of 5 MTPAat the end of First 5-year Plan (1951-56) to an installed capacity of about 320MTPA in 2012.• The structure of the market in cement sector tends to be generally dominatedby large plants. Some major global players like Holcim (212 MT), La’Farage(199MT), Heidelberg (112MT), Italcementi (81 MT) and Cemex (97 MT)together account for nearly 25 percent of the global capacity.• Indian cement industry is dominated by 20 companies which account for over70 % of the market. The major players like ACC, Ultra Tech and AmbujaCements have been quite successful in meeting the demand and supply ofcement.• Cement industry’s overall capacity utilization has not been very satisfactoryalthough there are few ups and downs in the past few years.• The factors contributing towards low capacity utilization include:o Poor quality coal with up to 45% ash content and irregular supply.o Power cuts, power tripping and unstable supply voltage.o Transportation bottlenecks in transporting cement and coal over.o Transportation bottlenecks in transporting cement and coal over longdistances.
  • 102. o Lack of operational experience and trained manpower with the newlyemerging large size plants to absorb and adopt the technologicaldevelopments.o Lack of proper plant maintenance system.• With the free sale and distribution of cement, the cement producers nowexperience a different market situation and the industry is now subjected toincreased competitions with respect to availability of high quality cement.This means lower cost of production, increased production efficiency, use ofmost modern technology for energy efficiency and quality cement production.• Absorption and adaption of technology depends to a great extent on theresearch & development activities of the licensees. The major R&Dorganizations devoted to cement industry in India are National Council forCement and Building Materials (NCCBM), Central Research Station (CRS) ofACC Limited, Dalmia Institute of Scientific and Industrial Research (DISIR).• The demand for cement in India has been influenced mainly by the housing,infrastructure and irrigation etc.• Opportunities and Concerns -o The government of India plans to increase its investment ininfrastructure to US $ 1 trillion in the twelfth five year plan.o More than 500 SEZ proposals.o Infrastructure projects in the pipeline such as dedicated freightcorridors, development of new industrial cities under the Delhi –Mumbai industrial corridor, National investment & manufacturingzones under the national manufacturing policy, up gradation ofexisting and the new ports & airports.o Growth in Tourism sector fuelling the increase in the construction ofhotels in the country.o Upcoming industrial clusters & infrastructure development inemerging tier – II & tier – III cities.o The growing population and increased Urbanization in the country.
  • 103. • Rich raw material reserve, world class technology adoption together withhealthy domestic demand gives Indian cement industry the cushion forfurther improvement.• Cement is highly taxed commodity in India; there is no import duty forimport of cement into the country.Inadequate railway infrastructure – Due to cement being bulky in nature,transportation of cement is always difficult. Distribution expenses is the fourthlargest cost component & accounts for 13 % of the total cost of the industry. Cementcarried by the railways fell 11.8 % to 7.52 MT in August, 2012 from 8.53 MT in theyear 2012 earlier, amid on increase in freight fares of as much as 24 %. For cementtransportation over long distances, railway infrastructure is considered more costefficient over road. But inadequate railway infrastructure forces all cement players toheavily depend on roads. The increased transport cost affects competitiveness of theindustry. But shortages in covered wagons in Indian railways forces cementmanufacturers to opt for expensive road transport.Cement & Clinker Dispatches by RailYear Cement Clinker Cement & Clinkercombined2010 - 11 35.00% 50.00% 37.00%2009 - 10 36.00% 50.00% 38.00%2008 - 09 38.00% 56.00% 40.00%2007 - 08 38.00% 57.00% 41.00%Major Concerns• Railway -
  • 104. o Non-availability of wagons not only throw into disarray, the dispatchplans and affect production of cement, it also obliges rake availability aconsistent problem.o Frequent shifting of priorities of rakes by railways to various sectorsi.e., fertilizers, food grains and power resulting in substantial despatchlosses to the cement companies as it is not possible for them to shifttheir mode of transport frequency.o Inadequate infrastructure facilities at terminals like platform, doubleline, access road etc.o Railways policy circulars, issued from time to time in a bid to increasethe turnaround of wagons, have not only created for the cement plantsoperational problems both at loading and unloading points but havealso made them liable to pay penalties, wharf age and demurragecharges.• Inadequate use of concrete in road development – In India most of the roadshave been used to develop surfaced road and only 2 % of the total road lengthin the country is made of concrete but concrete roads have average life cycleof 50 years and helps to save fuel consumption up to the level of 15 %. Inorder to develop cost effective environment friendly roads governmentshould encourage the use of fly-ash based cements for road development.This kind of initiative will result in a gainful deployment of waste pollutantlike fly - ash in one hand and boost the domestic cement industry on theother.RECOMMENDATIONS-
  • 105. • All manufacturers should Endeavour to set up and strengthen R&Dinfrastructure particularly aimed at absorbing /adapting/developing newertechnologies for better energy efficiency, quality enhanced and optimumoperating efficiency. The co-ordination between the R&D plans of the licensorand those of the licensees should be clearly established.• All the concerned cement plants should Endeavour to set up computerizedkiln and mill simulations which have revolutionized the operators training inthese areas for gaining or improving operating knowledge at lower cost,lesser time and practically no risk. To start with, use of these simulators maybe taken-up on a centralized basis.• Cement industry should be provided with access to inputs, particularly coal,pet coke and gypsum at nil rates of customs duty and differences in taxtreatment need to be removed to offer a level playing field to domesticproduction imports. The import of duty of cement should also have a duty.• Cement industry being energy intensive, the energy conservation andalternate cheaper, renewable and environment friendly sources of energyhave assumed greater importance for improving productivity. Some of themajor challenges that are going to face by the cement industry are quality ofthe raw materials like coal, fuel, fly ash and inconsistent power supply.• The application of nanotechnology to cement and concrete is expected toresult in development of eco-friendly, high performance cements / bindersand concrete with improved durability characteristics. It would also help inachieving the goal of sustainable development.• To sustain the level of competitiveness, government needs to provide levelplaying field in terms ofo Improved Infrastructureo Lower Taxeso Ensure quality coalo Consistent power supplyo Exploring export market
  • 106. FUTURE OUTLOOKDespite apprehensions about the impact of inflation and a slowdown in industrialproduction and overall economic scenario, the outlook for the cement sector remainspositive in respect of growth in demand in the foreseeable future. Infrastructure andhousing are still moving apace. However what is of concern to the industry arestaggering rise in input costs and pressures to cap selling prices at the same time.Unless the industry is able to recover cost increases, through suitable adjustments inselling prices through rational economic considerations, the cement industry will beunder pressure.A large number of foreign players are also expected to enter the cement sector in thenext 10 years, owing to the profit margins, constant demand, and right valuation.Consolidation of the cement sector too will take place and cement plants producingless than 1 million tonnes will find it difficult to survive in this market. Cementcompanies will go for global listings either through the FCCB route or the GDRroutes.The industry experts project the sector to grow by 9 to 10% for the current financialyear provided Indias GDP grows at 7%. With help from the government in terms offriendlier laws, lower taxation, and more infrastructures spending, the sector willgrow and will take India’s economy forward along with it.In the present scenario of hectic competition it has been seen that the biggest playerin the market remains big and does not allow other companies to rise. The cementindustry is expected to grow steadily in the near future. In the analysis it has beenseen that the ACC LTD and Ambuja Cements are over shadowing all othercompanies in terms of performance. So recommendations to other companies willinclude increasing their customer base and decrease their cost of productions andimprove their performance with respect to sales, financial prudence and capacityutilization.
  • 107. Indian companies would have to identify the threat from global cement playersentering the market and find demand for the product in neighbouring countries andcontinents. Smaller companies should consolidate their businesses to survive in themarket, which will be dominated by larger players.The companies have to get a higher share of sales in the market. This would requiremulti-product entities. Indian companies need to focus on products other than justcement like RMC (Ready Mix Concrete), and research new building materials thatwill create a niche for them in the market.To produce high quality cement and in the cheapest and most efficient mannerpossible, new technologies have to be adapted. New technologies have to beintroduced and implemented across various plants and factories for enhancedcontrol and efficient production of the product. Process automation has to beemployed to create high quality products.To gain a high visibility in the market and pose stiff competition to mostmultinational brands, research is going to be the key. Research to develop newer,cheaper and more efficient technologies for creating cement and other products.Niche products like cement with fragrance, pre-collared plasters can also bedeveloped for increased consumption.The main opportunities which can drive the demand in the coming years are theexpected improvement in the economy and corporate spending. This could lead to apick up in the demand from institutional clients. Also with the general electionsslated in FY14. The government may dole out higher benefits to the low and middleincome groups. The increase in the disposable income of these groups might trickledown to higher housing demand in FY14-15. The per capita consumption of cementat ~156kg is significantly lower than the world (396kg) and china’s average (1390kg).Thus, in the next 3-5 years, the thrust of the government on infrastructureconstruction along with rising real-estate penetration could lead India to be one ofthe most lucrative cement markets in the world.
  • 108. Furthermore, since the demand could not grow in sync with the high pace ofcapacity addition over FY06-11. The industry is plagued by an over capacitysituation, in a moderate growth phase, the pricing power of the players vying for ahigher market share. This combined with escalating raw material and fuel costsleads to a decline in profitability for the incumbents.With the pace of infrastructure development in the overall economy expected toincrease over the next 3 to 5 years, the rising institutional mix will also increase thepenetration of RMC, which has a very high penetration rate in the developed world.Another trend, which might play out over the years is raising “inorganic activity”.The large global or domestic players might look to grow through the inorganic routegiven the lengthy process of acquiring land and other environmental clearancesrequired to setup Greenfield plants. However, this is not going to be easy, since mostof the smaller players have strong profitability and would only sell at a highpremium to the replacement costs. Many global players are very small players inIndia and hence they may use this route to establish their presence on one of thelargest and fastest growing markets.