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Phillip Lasserre (2007). Globalization cement industry, global strategicmanagement
The history of the cement industry in India dates back to the 1889 when a Kolkata-based company started manufacturing cement from Argillaceous. But the industry started getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd was established in Porbandar with a capacity of 10,000 tons and production of 1000 installed. The World War I gave the first initial thrust to the cement industry in India and the industry started growing at a fast rate in terms of production, manufacturing units, and installed capacity. This stage was referred to as the Nascent Stage of Indian Cement Industry. In 1927, Concrete Association of India was set up to create public awareness on the utility of cement as well as to propagate cement consumption.
Surya Group plans to invest US$ 873.3 million in a new 5 million MT cement plan to be set up in Gujarat.My Home Industries Limited (MHI), a 50:50 JV between My Home Group and CRH Plc, plans to scale up its cement production capacity from the existing 5 mtpa to 15 mtpa by 2016
CAGR in short, stands for Compounded Average Growth Rate. It stands for the average returns needed per annum to be able achieve the current amount of profits or losses from the original capital.
MBA Sem 3
•The word Cement has come from the Roman word ‘Opus
•Cement is a binder, a substance that sets and hardens
independently, and can bind other materials together.
•The most important use of cement is the production
of mortar and concrete—the bonding of natural or
artificial aggregates to form a strong building material that is
durable in the face of normal environmental effects.
•Joseph Aspdin, a British stonemason, invented Portland cement
way back in 1824. With this invention, Aspdin laid the foundation
of today’s cement industry.
What is CEMENT?
•Production of Concrete
• Construction Purpose
(Floors, Beams, Columns, Roofing)
(Roads, Pathways, Crossings, Bridge)
o Water (Pipes, Drains, Canals)
o Agriculture (Irrigation, Housing)
USES OF CEMENT
•Ordinary Portland Cement (OPC)
•Portland Pozzolana Cement (PPC)
•Portland Blast Furnace Slag Cement (PBFS)
•Oil Well Cement
• Sulphate Resisting Portland Cement
•White Cement etc.
TYPES OF CEMENT
The basic raw materials used in the cement manufacturing process are
limestone, sand, shale, clay, and iron ore.
•Today, it is estimated that there are around 1500 integrated cement
production plants in the world.
•It is estimated that world cement consumption is to rise on an
average between 3.6% and 4.8% per year in the coming years.
•Most of the growth is coming from Central and Eastern Europe and
Asia, growth in mature markets also looks healthy.
•The share of the four largest firms account only for 23% of the
•LAFARGE and CEMEX have become very strong global cement
EVOLUTION OF INDIAN CEMENT
•A Kolkata based company started manufacturing cement in
•In 1914, Indian Cement Company Ltd was established in
•In 1927, Concrete Association of India was set up to create
public awareness on the utility of cement.
•In 1956, price and distribution system of cement industry came
under government control.
•After the economic reform in 1980’s the government control on
cement industry was liberalized.
•A great increase in demand of cement, has resulted India to
become 2nd largest cement producer in the world after China.
•Cement is made out of limestone, shale, clay mined out of quarry
close to the plant. The raw material is crushed, and then heated at
temperature in excess of 1000 degree Celsius in rotating kiln to
become clinker. Clinker is then mixed with gypsum and ground to a
fine powder to produce final grade of cement.
•The technology is a continuous process and is highly energy
•At present 93% of cement production in India is based on modern and
environment-friendly dry process technology and only 7% of the
capacity is based on old wet and semi-dry process technology.
•The cost of Cement is 29% energy; 27% raw materials; 32% labour
and 12% depreciation
FDI and GDP
ECONOMIC STATUS OF
THE CEMENT INDUSTRY
•India is the world’s second largest producer of cement with total capacity
of 224 million tonnes as on April 2010.
•Indian Cement Industry comprises of 140 large and more than 365 mini
•According to ACC cement report, Government’s continued thrust on
infrastructure will help the cement to maintain an annual growth of 9-10%
•With addition in the cement production, it is expected that cement
production in India will reach 300 million tonnes in the coming years.
•Cement and gypsum products have received cumulative FDI of US$
1708.69 million between April 2000 and March 2010, according to the
Department of Industrial Policy and Promotion.
•Madras Cements Ltd is planning to invest US$ 178.4 million to increase
the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from
2 MT by April 2011.
•Shree Cement, plans to invest US$ 97.13 million this year to set up a 1.5
MT clinker and grinding unit in Rajasthan. Moreover, in June 2010, Shree
Cement signed an MoU with the Karnataka government to invest US$
423.6 million for setting up a cement unit and a power plant.
•Jaypee Associates plans to invest US$ 640 million to increase its cement
•Swiss cement company Holcim plans to invest US$ 1 billion in setting up
2-3 greenfield manufacturing plants in the country in the next five years to
serve the rising domestic demand.
•During 2007-08, the export of cement from India touched the
2.16 million tonnes mark. However during 2008-09, the cement
export from India stood at 1.46 million tonnes.
•In spite of seeing fall during 2008-09, the export segment of
the industry is expected to grow again on account of various
infrastructure projects that are being taken up all over the
world. India has an immense potential to tap markets of Middle
East and South East Asia
•The negative ACGR (Annual Compound Exponential Growth
Rate) of -5.52% in control period has seen ACGR of 35.35% in
decontrolled and opened up economy
•The industry occupies an important place in the national economy
because of its strong linkages to other sectors such as construction,
transportation , coal and power.
•The cement industry is one of the major contributors to the
exchequer by way of indirect taxes.
•100% FDI is permitted in the cement industry.
•It contributes approximately 1.3% of GDP and the industry is
employing over 0.14 million people
FDI AND CONTRIBUTION
TO THE GDP
MAJOR PLAYERS IN THE INDIAN
Company Production* Installed Capacity*
ACC 17,902 18,640
Ambuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Century 6,636 6,300
Madras Cements 4,550 5,470
Birla Corp. 5,150 5,113
*in Million Tonnes
(Source:Mapsofindia.com 2010, Tradechakra 2008)
•14 cement plants
•19 RMC plants
•19 Sales offices
•Gujarat Ambuja Cements Ltd
• plants in 7 states
•7 cement plants in AP and TN
•JK Cement Ltd
•2nd largest White Cement
manufacturer in India
•Holds 18% market share in
•3 production plants in Rajasthan
•Plants located in MP and UP
•A part of Aditya Birla Group
•73 RMC plants
•11 composite plants
•1 white cement plant
•12 grinding units
•A part of Aditya Birla Group
•7 split grinding units
•11 composite plants
•4 Bulk terminals
•10 RMC units
•One of the oldest cement
companies in southern
•3 production plants in
TN, AP and Karnataka
•Has put up new RMC
•2 production plants in
MP and Rajasthan
•2 Grinding units
•4 production plants
•High Transportation Cost is affecting the competitiveness of the
cement industry. Freight accounts for 17% of the production cost.
Road is the preferred mode for transportation for distances less than
250km. However, industry is heavily dependant on roads for longer
distances too as the railway infrastructure is not adequate.
•Cement industry is highly capital intensive industry and nearly 55-
60% of the inputs are controlled by the government.
•There is regional imbalance in the distribution of cement industry.
Limestone availability in pockets has led to uneven capacity
•Coal availability and quality is also affecting the production
ISSUES CONCERNING THE CEMENT
S.No New Entrant Country Purchased
1 Holicim Ltd Switzerlan
14.8% of Ambuja Cement
France o Raymond Cement
o TISCO (TATA Cement)
3 Italcementi Italy Zuari Industries
4 Heidelberg Germany o Indo-Rama Cement
o Diamond Cement
S.No Future Companies Current Business
1 Reliance ADAG o Infrastructure
o Power etc.
2 Jindal Steels o Steel
3 Murli Agro o Agro Products
ACQUISITIONS BY FOREIGN CEMENT
GIANTS IN INDIA SINCE 1999
COMPANIES PLANNING TO ENTER
INDIAN CEMENT INDUSTRY LIFE
•The Indian cement industry has witnessed a phenomenal capacity addition to
the tune of about 52 million tonnes in the last two financial years which
accounted for about 24% of the industry’s capacity of 218 million tonnes at
the end of FY09
•With as many as four new foreign players having entered the Indian
cement market and two-three expected to come in the near future, the
competition is expected to get tougher
STRUCTURAL DRIVERS OF THE
GOVERNMENT: From the era of direct government control over cement
production and distribution to today’s globalization of Indian cement
industry, Government of India has always been one of its major drivers of
change. Tax concession, Tax rebate, etc. to new foreign players have changed
the entire cement business in India. With multinational cement players coming
in, the cement quality and standards have improved a lot.
REAL ESTATE: The boom in the cement industry in India came in 2003, when
the real estate rates started rising. Over the past few years (FY03-07), cement
demand has grown at a CAGR of 8.37% which is higher than the CAGR of
supply at 4.84%. Real estate sector is the key driver and accounted for almost
55% of cement demand in FY 07.
INFRASTRUCTURE: In this FY10 budget, the Government will be spending Rs.
1.73 trillions on infrastructure. With many international events like
Commonwealth games 2010, Hockey World Cup 2010, Cricket World Cup 2011
etc, the need to develop world class infrastructure was felt in early 2000’s. As a
result, many new multi billion dollars project were sanctioned to develop roads,
metros, airports, railway stations etc all across the country, thus, boosting the
demand for cement.
• Coal rates, power tariffs, railway freight plays a very important
factor in the price determination, interestingly, government control
all of these prices
• Govt is one of the biggest consumers of the cement
• Future of cement industry is very strong
• A lot government infrastructure and housing projects are under
• Indian consumers prefer buying branded cement like LAFARGE,
• Industry will create 25 lakhs jobs in coming years
• Govt is acquiring new technology from Japan
• Emphasis is on creating highly energy efficient and environment
friendly technology to produce cement