1. INTRODUCTION -
India is the second fastest growing economy in the world after China. Various
industries are contributing for this growth. They are Agriculture, Infrastructure,
Energy & Power, Banking & Finance and service sector. In India, Construction is the
second largest economic activity after agriculture and is poised for continuous
growth due to industrialization, urbanization and economic development with
expectations of improved living standards of people in India. It accounts for nearly
65 percent of the total investment in infrastructure, employs 33 million people
approximately and accounts for 6-8 percent of GDP. The Construction industry is
primarily driven by Government of India investment on core infrastructure projects
and creation of urban infrastructure, industrial capital expenditure by corporate
sector and development activities of real estate or housing sector in urban as well as
rural 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 growth
is due to rapidly developing services and manufacturing sectors, increasing
consumer demand (largely driven by increased spending by India’s middle class)
and government commitments to rejuvenate the agricultural sector and improve the
economic conditions of India’s rural population. The production of industrial
machinery has also been on the rise – and the increasing flow of goods has spurred
increases in rail, road and port traffic, necessitating further infrastructure
improvements.
As per the Eleventh Five Year Plan, more than USD 500 billion worth of investment
is planned to flow into India’s infrastructure by 2012. Construction projects account
for a substantial portion of the proposed investments, making the E&C sector one of
the biggest beneficiaries of the infrastructure boom in India. The regulatory
environment is relaxing to encourage further foreign direct investment (FDI).
2. Construction Sector-Macro Aggregates -
Macro-Variable 2006-07 2007-08 2008-09 2009-10 2010-11
GDP from Construction
(at Constant pries – Rs
Cr)
284798 315389 332557 355918 384629
Share of Construction in
GDP (%)
8 8.1 8 7.9 7.9
Growth rate for GDP in
construction (%)
10.3 10.7 5.4 7 8.1
Source: Handbook of Statistics, RBI-2010-11.
Construction Industry 2009 2010 2011
Cement Consumption (M.T.) 142.23 159.43
Residential construction workload
(M.T.)
78.7 75.5
Total 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 on
infrastructure. While 50% investments in infrastructure will be done by the
government through cash contracts, the remaining will be either pure private
investments or PPP projects.
3. 2. In the total investment on Infrastructure, minimum 45 % is towards
construction and 20 % spend will be for modernization of the construction
industry.
Growth in Building sector -
1. Industrial sector sees a steady growth and contributes to the construction
sector in the non-residential segment.
2. IT growth would continue to create a demand for commercial facilities. STPs
and SEZ's are being built by real estate developers.
3. Hospitality and Tourism industry is driving the demand for hotels and
resorts.
4. Retail growth on account of increasing consumer disposable incomes is
driving 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 in
land the project construction is mainly retail financed.
2. The real estate developers traditionally employed contractors for construction
of projects. Several large contractors are transitioning towards becoming real
estate developers as well.
INDUSTRY SEGMENTATION -
Construction sector can be broadly classified into 2 sub-segments:
1) Real estate (Residential, Commercial/Corporate, Industrial and Special
Economic Zones (SEZs))
2) Infrastructure (Transportation, Urban development, Rural
development, Utilities)
4. Figure-1: Construction Industry Structure.
Indian Real Estate Sector -
The real estate and construction sectors are playing a crucial role in the
development of India's core infrastructure. The real estate industry's growth is
depends on the developments in the retail, hospitality and entertainment (hotels,
resorts, cinema theatres), hospitals, schools and IT enabled services. It has greater
prominence in India with the liberalization of economy, increase in business
opportunities and labour migration.
5. The Government of India has allowed FDI up to 100 percent in the automatic
route in townships, housing, built-up infrastructure and construction development
projects to increase investment, generate economic activity, and create new
employment opportunities. The Union Budget 2012-13 shown more importance on
accelerating the pace of investment in infrastructure, as this is critical for sustain and
accelerating an overall growth.
Major Projects in Real estate sector in India -
• Mumbai based Wadhwa Group to invest Rs 9-10 billion to develop 1.6
million sq. ft. Of office space in Bandra Kurla Complex, Mumbai. The
project will consist of two office towers and is due to be completed by
2014.
• Bangalore-based Embassy Property Developments is in talks with global
financial services group, JP Morgan to raise Rs. 500 crore for two projects
– premium villa project and a IT-cum-residential development on Bellary
Road.
• Kochi-base Asten Realtors has proposed to invest Rs 1,000 crore in the
next three years in various projects in central Kerala.
• Avalon Group has made the initiative to start up Rs 200 crore project
named "Avalon Regal Court" in Bhiwadi, Rajasthan. The project is being
planned on tweleve-acre space consisting of eight hundred housing units
and is expected to be completed over the next three years.
Driving Forces -
• Growth in the economy.
• India's emergence as an attractive offshore destination and availability of
pool of highly skilled technicians and engineers.
• Developments of large captive units of major players include GE,
Prudential, HSBC, Bank of America, Standard Chartered and American
Express.
• Rise in disposable income and growing middle class, increasing the
demand for quality residential real estate and real estate as an investment.
6. • Entry of professional players equipped with expertise in real estate
development.
• Relaxation of legal rulings and processes by the governing bodies
encouraging investments in real estate.
• Improvement in infrastructure facilities.
Infrastructure Sector in India-
Performance of core industries:
Sector weig
ht
2007-08 2008-09 2009-10 2010-11 2011-12 Apr-
Nov
2011-12
Apr-
Nov
2012-13
Jan
2012
Jan
2013
Coal 4.38 6.3 8 8.1 -0.2 1.2 -4 6.7 7.7 2.3
Crude oil 5.22 0.4 -1.8 0.5 11.9 1 2.9 -0.5 -2 -0.2
Natural
gas
1.71 2.1 1.3 44.6 10 -8.9 -8.5 -13.1 -10.4 -16.8
Refinery
products
5.94 6.5 3 -0.4 3 3.1 4.4 7.2 -4.6 10.5
fertiliserx 1.25 -7.9 -3.9 12.7 0 0.4 -0.7 -3.3 4 -9.1
Steel 6.68 6.8 1.9 6 13.2 7 8.9 3.4 4.5 9.4
cement 2.41 8.1 7.2 10.5 4.5 6.7 4.8 6.7 10.9 -6.6
electricity 10.32 6.3 2.7 6.2 5.6 8.1 9.4 4.6 3.2 5.9
Overal
index
37.9 5.2 2.8 6.6 6.6 4.4 4.8 3.5 2.2 3.9
Source: Press Information Bureau, Government of India Ministry of Commerce & Industry.
7. Coal
CrudeOil
NaturalGas
RefineryProducts
Fertilizers
Steel
Cement
Electricity
OverallIndex
-15
-10
-5
0
5
10
15
Apr-Nov
2011-12
Apr-Nov
2012-13
Industry
GrowthRate(%)
Industries which support the infrastructure are crude oil, petroleum, refinery
products, coal, electricity, cement and finished steel having weight of 37.9 % in the
index 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 growth
hampered 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 with
growth rate of -9.1 % (Jan 2012 4.0%) and remaining sectors shown the growth
moderately. These include Refinery Products 10.5 % (Jan 2012 -4.6%), steel with
growth rate of 9.4% (Jan 2012 .5 %), Electricity with growth rate of 5.9 % (Jan 2012
3.2).
Cement production registered to growth of (-) 6.6 % in January 2013 against
its 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 period
of 2011-12.
The manufacturing industry growth depends on the inputs from these core
industries especially on electricity. Therefore it is of utmost importance to amplify
core sectors production. Indian Government taking much future plan of actions
immediately and quickly towards it. The union budget for 2012-13 has given full
exemption from basic customs duty to fuels such as natural gas, liquefied natural
gas; steam coal and uranium concentrate imported for power generation. Viability
gap funding has been extended to capital investment in fertilizer industry, oil and
gas storage and pipeline facilities for supporting the scheme of public private
partnership (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 with
assistance from WB & ADB.
• Raising corpus of Rural Infrastructure Development Fund (RIDF) to
20,000 crore and 5,000 crore to NABARD to finance construction for
warehousing.
• 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 of
2013-14.
• Target of covering length of 8,800 kms under National Highway
Development Programme (NHDP) during FY13. Allocation of the Road
Transport 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 in
Andhra 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.
26.94
16.41
16.93
11.54
9.05
4.58
3.55
1.57
1.05 2.67
5.72
Investment in the infrastructure sector during 12th five year pan
Electricity (incl. RE)
Roads and Bridges
Telecommunications
Railways (incl. MRTS)
Irrigation (inc WS)
Water supply and SN
Ports (incl. ILW)
Airports
Storage
Oil nd Gas pipelines
Renewable Energy
Planned Infrastructure Investments -
India's economy has been growing at a rapid pace, and to maintain the
momentum of its growth, the Government has strengthened its focus on
infrastructure development in the country. It has increased its infrastructure spend
as a percentage of the country's GDP from 5.15 % during the Tenth Five Year Plan
(2002-2007) to 7.55 % during the Eleventh Five Year Plan (2007-2012). This is
expected 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 trillion
during the Twelfth Five Year Plan from INR 20.5 trillion during the Eleventh Five
Year Plan period, as compared to planned infrastructure investments of INR 8.7
trillion 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, and
that of the Eleventh Plan period may realize 80 % of the target.
Power
Roads&Buildings
Telecommunications
Railways
Irrigation
WaterSupply
&Sanitation
Ports
Airports
Storage
Oil&Gas
Pipelines
0
10
20
30
40
10th five year plan 11th five year plan 12th five year plan
%ofexpenditure
The telecom sector has been witnessing increasing investment over the past 10
years. During the Twelfth Plan Period, almost 25 % of investments are expected to be
invested in this sector. While the roads & bridges sector has remained flat (17%) as a
percentage 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 is
the oil and gas segment – with the Government's spend on the sector expected to
increase from 3.5 % of its total infrastructure spend during the Tenth plan to 6.4% in
the Twelfth Plan.
The Planning commission has targeted an ambitious investment of Rs. 65 lack
crores for the 12th
five 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’s
gross domestic savings has been over 30% in past 4-5 years.
Sector wise Investment during Five Year Plans –
Sector Tenth Plan Eleventh
Plan
Twelfth Plan
(Projections)
Electricity (Incl. RE) 274,661 728,494 1,501,666
Central 103,431 233,501 4,407,961
State 102,054 184,696 347,043
Private 69,176 310,297 713,827
Roads nd Bridges 152,616 453,121 914,536
Central 71,536 194,678 336,094
State 68,143 165,903 274,433
Private 12,937 92,540 304,010
Telecommunications 144,669 384,962 943,899
Central 50,626 86,375 72,110
Private 94,042 298,586 871,789
Railways (incl MRTS) 103,493 242,906 643,379
Central 100,077 192,147 419,221
State 2,743 41,671 136,158
13. Private 672 9,090 100,000
Irrigation (Incl WS) 121,475 243,497 504,371
Central 9,661 14,426 42,171
State 111,814 229,071 462,200
Water Supply and SN 60,577 120,774 255,319
Central 21,508 46,003 98,382
State 37,958 74,607 150,582
Private 1,111 164 6,355
Ports (Incl ILW) 22,351 44,536 197,781
Central 2,630 5,480 20,670
State 916 2,759 5,563
Private 18,805 36,298 171,548
Airports 7,354 36,311 87,714
Central 3,855 11,873 15,041
State 717 1,030 2,449
Private 2,782 23,408 70,224
Storage 5,591 17,921 58,441
Central 3,065 5,956 12,280
State 124 2,116 4,198
Private 2,402 9,850 41,963
Oil and Gas Lines 23,389 62,534 148,933
Central 21,088 35,179 71,594
State 2,279 4,070 5,969
Private 23 23,284 71,370
Renewable Energy 89,220 318,626
Central 9,630 33,003
State 1,018 5,425
14. Private 78,572 280,198
Grand Total 916,176 2,424,277 5,574,663
Central 387,477 856,717 1,601,061
State 326,748 680,056 1,289,762
Private 201,951 887,504 2,683,840
Grand Total 916,176 2,424,277 5,574,663
Public 714,225 1,536,773 2,890,823
Private 201,951 887,504 2,683,840
GDP mp 18,246,267 33,604,450 68,163,208
Investment as % of
GDP con.
5 7 8
Roads & Highways -
India has the world's second - largest road network, comprising a total length
of 4.2 million km, and accounting for 87 % passenger traffic. Total investment in the
Twelfth Five Year Plan is estimated to be 9,14,536 crores. The National Highway
Development Programme (NHDP) has planned a high expenditure. It seeks to
award 29,000 km of roads from FY 2011 to FY 2015 – out of this, 7,300 km were
awarded in FY12. (PPP mode) Till August 2011, 247 PPP projects were awarded
under NHDP.
Railways -
Indian Railways network spans over 64,000 route km, making it the world's
third largest rail network in terms of size besides being the largest passenger carrier
and the fourth – largest rail freight carrier globally. In the Twelfth Five Year Plan
total investment is estimated to be 6,43,379 crores (including MRTS). Rail projects in
India have been typically the domain of the public sector. However, based on the
success of PPP in other infrastructure sectors, the Indian Railways has begun to take
steps to explore the PPP route. Mass Rapid Transit System (MRTS) is expected to
comprise major portion of total planned investments in coming years. During the
15. Twelfth Plan period, private sector spending is expected in MRTS systems in cities
such as Mumbai, Bangalore, Hyderabad and Kolkata. The Indian Railways is also
expected to initiate PPP projects to maintain & develop railway stations. It has
identified 22 stations across India that will be modernized into world – class
facilities.
Ports -
India has 13 major ports and around 200 non-major ports, accounting for 95 %
of the country's 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 % from
8.7 million tons to 883 million tons. In the Twelfth Five Year Plan total investment is
estimated to be 1,97,781 crores. The National Maritime Development Programme
seeks 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 at
major ports. These projects include a mega container terminal at Chennai port and a
mechanized berth at Vishakhapatnam. However, the only project that has been
awarded so far is the Jawaharlal Nehru Port Trust Terminal.
Airports -
India has a total of 136 airports with 9 owned by the Airport Authority of
India. During 2007–11, passenger and freight traffic at Indian airports increased at a
CAGR of 10.44 % & 10.9 %, respectively, despite global slowdown. In the Twelfth
Five Year plan total investment is estimated to be 87,714 crores. With prospects for
growth 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 be
the largest Greenfield airport in terms of cost and capacity, and is expected to be bid
out this year. The nodal agency CIDCO is in the process of finalizing the bid
mechanism. However, feasibility of such large projects continues to be a concern.
Infrastructure linkages are also immensely important, since provision of adequate
road, rail and water transport facilities will be critical for the success of large scale
airport development plans.
Power -
16. India's total installed power generation capacity stood at 2,11,766.22 MW as
on 31-01-2013. Robust economic growth and enhanced industrial activity has
significantly increased the demand for power in the country, leading to as much as
12 % peak hour power shortages. This makes a compelling case for further large
scale investments in the sector. In the Twelfth Five Year plan total investment is
estimated to be 15,01,666 crores. With the announcement of 14 Ultra mega power
projects (UMPPs). Out of these, four (Ssn, Mundra, Krishna Patnam and Tilaiya)
have already been awarded to private players.
Oil & Gas -
India's oil & gas sector continues to grow steadily, boosted by enhanced
investments, increased production and rise in private participation. In the next five
years, planned additions include 60.3 MMTPA of refinery capacity. 7.05 MMTPA of
new LNG terminals. In the Twelfth Five Year plan total investment to be 1,48,993
crores. Projects include an 18 MMTPA refinery being setup by Indian Oil
Corporation and a cracker unit of 5 MMTPA capacity by Reliance Industries Limited
in Jamngar.
Infrastructure Performance: (Growth in %)
Sector FY 08 FY 09 FY 10 FY 11 FY12(April-
Dec
Power 6.3 2.5 6.8 5.7 9.3
Railway revenue-earning
freight traffic
9 4.9 6.6 3.6 4.7
Cargo handled at major ports 12 2.2 5.7 1.6 0.4
Civil Aviation
Export Cargo handled 7.5 3.4 10.4 13.4 -1.1
Import cargo handled 19.7 -5.7 7.9 20.6 1.4
Passengers handled
international terminals
11.9 3.8 5.7 11.5 7.2
Passengers handled at 20.6 -12.1 14.5 16.1 17.5
17. domestic terminals
Telecommunication
Cell phone connections 38.3 80.9 47.3 18 -51
Roads *
NHAI 164.6 30.9 21.4 -33.3 8.9
NH(o) & BRDB 12.5 17.3 4 -6.8 -36.5
Source: 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 Development
Board
The Infrastructure sector during FY 2012 for the period April to December
noted a moderate growth. The growth rate of power sector during FY 2012 was
higher than the growth of FY 11. Railway sector has also shown slight growth in
revenue from freight traffic. Civil aviation passengers handled at domestic terminals
grew marginally while passengers at international terminals as well as export
import cargo handled declined severely. In road sector up gradation of highways by
NH (O) & BRDB depicted a negative growth.
RAW MATERIALS, EQUIPMENT AND TECHNOLOGY -
Construction materials and equipment sector accounts for approximately
8.6% of India's GDP and accounts for nearly two-third of the total construction cost
on 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 infrastructure
projects like roads, housing etc. In projects like power plants, industrial plants, etc.
The share, though lower, is critical. Construction materials and equipment sector
comprises 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 scale
industry, data available for quantifying the exact nature of linkages with
construction is not very accurate. On the other hand, linkages of products such as
paints and petro-products would again be difficult due to their stronger linkages
with other sectors. Where as in case of cement and steel, almost 100% of cement
production is consumed in construction and 40 – 60% of steel production goes into
construction.
Urban Construction Strategies -
Large size precast piers are used in the construction of flyovers over existing
roads or other utility services that are too important to be closed or dismantled for
the construction work of the flyovers. These massive precast structures are erected at
site with large capacity cranes that are themselves not to restrict the flow of traffic. In
addition, the Indian Society of Trench less Technology (INDSTT) introduced the
trench – less pipe laying technology to assist in interruption free construction in
urban environments. Besides project design, development, implementation and
monitoring are gradually getting transferred to the computers by consultants, project
owners and contractors. Some leading corporate agencies are planning initiatives for
web – enabled design, control and monitoring of construction projects.
19. Nanotechnology in Cement Industry -
Nanotechnology can play a significant role in the construction industry and
stands at eighth position in terms of most significant areas of applications in
nanotechnology. Nanoengineering of cement based materials can result in
outstanding or smart properties. Introduction of nanotechnology in cement industry
has the potential to address some of the challenges such as CO2 emissions, poor
crack resistance, long curing time, low tensile strength, high water absorption, low
durability and many other mechanical performances. A remarkable improvement in
the mechanical properties and durability of cementitious materials can be observed
with incorporation of nanomaterials such as nno-SiO2, ZnO2, Al2O3, TiO2, carbon
nanotubes, nano-days, carbon nanofibers and other nanomaterials.
Demand Drivers of Construction Materials Industry:
Government initiatives in the infrastructure sector, coupled with the housing
sector boom and urban development, continue being the main drivers of growth for
the Indian construction materials industry.
• Individual Housing Demand – Primary drivers -
◦ Efforts by the government to boost the demand for houses in the below Rs
20-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 guarantee
scheme.
◦ 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 the
demand for construction material industry.
Construction Equipment – Success Factors
1. Ability to introduce India specific products that include low priced
multipurpose equipment to attract new customers and to increase
mechanisation in important areas adding features to products that make
suitable for use in India and launching new applications and products for
missing applications.
2. Ability to capture exports opportunities in areas such as engineering and
design services that leverage the India's technical prowess
3. 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 catalyse
latent demand particularly from rural areas and small towns.
6. Strengthening of dealer and channel network to address buyer fragmentation
following the trend of sub – contracting and geographic expansion of
demand.
Construction Equipment – Risk Factors
1. Competition from low-cost producers.
2. Tax burden and anomalies- India has one of the highest indirect taxes on
construction 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 and
skilled)
21. 2. Provides opportunity for seasonal employment thereby supplementing
worker's 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 infrastructure
in any country. Due to the various construction activities undertaken by the central
government, 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 every
household and, therefore, market demand of cement for private consumption is
increasing constantly. According to the Ministry, the liberalization process provided
the much desired demand to the cement industry and, the growth was quite visible
leading to noticeable growth in terms of 100 million tonnes capacity addition during
the decade 1999 to 2009.
Key points -
• Cement Industry is now the second largest cement producer in the world
after 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 Aditya
Birla 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 the
palcolithic 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 based
mixture 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. The
Greeks have made further improvements and finally, the Romans have developed
the cement that produced structures of remarkable durability. The secret of roman
success in making cement was traced to the mixing of slaked lime with pozzolona,
volcanic ash from Mount Vesuvius. The cement produced on this process was
capable of hardening under the water. This art was somehow lost during the middle
age periods.
23. In the 18th
century, big efforts were started in Europe to understand why some
lines have hydraulic properties. John smeaton concentrated his work in this field and
he made the first modern concrete by adding pebbles as a coarse aggregate along
with mixing powered brick into the cement in the year 1759. A number of
discoveries have followed. It was in the year 1817 louis ricat has conducted the work
as the hydraulic nature of the lime – volcanic ash mixture. He was the first person to
accurately determine the proportions of lime stone and silica required to make the
mix of cement. Finally, in the year 1824, joseph aspdin patented the basic process of
slower setting cement. He addressed this as Portland cement due to the fact that in
appearance and hardness, it resembled the upper Jurassic rock found in the region of
Portland in southern England.
Global Production of Cement -
The world combined cement production all over the world accounted for 3.78
billion tonnes in the year 2012 (3.60 billion tonnes in 2011). Out of which, china has
contributed substantially to the world production. China and India virtually have
reached the stage of self – sufficiency related to production of cement.
US
Brazil
China
India
Iran
Japan
Pakistan
Russia
Turkey
Vietnam
0
500000
1000000
1500000
2000000
2500000
Global Cement Production-2011
24. Global Top Consumers –
China
India
USA
Brazil
Russia
Iran
Turkey
Egypt
Vietnam
Indonesia
0
100
200
300
2048
222
72 65 58 56 56 50 49 48
Top Consumers - 2011
Country
Consumption(Mn.T)
China leads the way in cement consumption and production around the world due
to the large scale developments and infrastructure build-up projects that the Chinese
government is undertaking. Some of the slowdowns in production are due to
dramatic downward demand shifts in the residential housing markets of the United
States and Europe. However, public projects are keeping the total cement production
around the world on the rise. It is interesting to note that production is concentrated
in developing nations. With the exception of the US, Japan and Spain, all other
nations are still in a developing phase. While the majority of the production is locally
consumed, a good chunk of the cement produced is exported. This means that come
production has shifted to these nations – whether it is because of cheaper labour, less
strict environmental regulations, or subsidies.
Export of Cement Globally-
Country 2009-10 2010-11
Qty (T) Value (Rs '000) Qty (T) Value (Rs '000)
All countries 2689485 6657266 3612062 9554773
25. Nepal 1351941 3416817 1766895 5236164
Srilanka 206250 442858 932251 1864054
Iraq 175150 474169 189982 472490
Maldives 21935 56446 108910 449607
South Africa 9884 39790 47043 197662
Soudi Arabia 9884 39790 47043 197662
Egypt 17335 33292 110758 168119
UAE 50636 157719 54004 145337
Mozambique 65038 122069 52811 109922
Madagascar 41736 78179 58421 108353
Other Countries 721501 1720303 219046 573543
Indian cement accounts for not more than 0.2% of total world cement exports.
The sector's relatively insulated from international markets. Given by bulky nature
of the commodity and inadequacy of transport infrastructure in the country,
international trade has been limited to neighbouring states in small quantities. Even
that 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 in
2009-10. 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 2010-11
Qty (T) Value (Rs '000) Qty (T) Value (Rs '000)
All countries 2111997 5683270 1095624 3526386
Pakistan 652060 1936300 594481 1688541
Bangladesh 169586 624565 289084 1056092
26. China 568757 1371538 177999 542014
Germany 1161 18593 7422 74223
UAE 5983 38777 4800 31086
Malaysia 17854 51762 8896 29920
France 1010 29934 994 28767
Netherlands 976 25525 1264 24779
Bhutan 3061 9520 3278 12367
UK 266 6707 307 6760
Other countries 691283 1570049 7099 31837
Cement imports in 2010-11 decreased sharply to 1.1 million tonnes from 2.11 million
tonnes in 2009-10. Main suppliers in 2010-11 were Pakistan (54%), Bangladesh (26%)
and China (16%).
Porters Five Forces -
Porter's five forces provide a competitive framework that allows us to better
understand the different dimensions that govern market competition.
Porter's five forces are:
1. Internal Rivalry
2. Threat of substitutes
3. Buyer's bargaining power
4. Supplier bargaining power and
5. Entry and exit barriers
Rivalry within the cement industry is moderate. The structure of the market
tends to be oligopolistic in different regions around the world. In other words only a
few firms control the market in many different countries. This is due to the high
fixed 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 a
cost by switching from one firm to another (low switching costs) and when the
product lacks differentiation, this creates haven for competition and intense rivalry.
The combinations of the above factors result in moderate rivalry within the global
cement industry.
The second force is the threat of substitutes. Lack of substitutes – other
products that are not within the same industry but can be used instead. This means
that the industry does not face a credible threat of competition. This represents the
reality of cement industry. No product exists to date that can substitute effectively
for cement. While construction firms can useless cement in exchange for using other
materials that have some cementitious quality, that substitution effect is negligible
on the market price of cement. An industry is only threatened if another industry
produces a similar product or if consumers of that product can decrease the ratio of
their use of that product and use another product (minimal partial substitution).
Both of these choices are virtually non – existent to cement consumers, hence the
threat of substitutes is very low.
Buyer bargaining power – Pure buyer power exists when only one buyer
exists in the market (monopsony). In this case power is entirely in the hands of the
buyer. In the cement industry, facts suggest that this effect is minimal. The power of
consumers 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. Buyers
are said to be powerful if they are highly concentrated, purchase a large amount of
the product, or if there is product standardisation. The last effect exists but its impact
is weak because of persistent shortages in the cement market. Given the fact that the
buyers in the cement market lack the characteristics that give them power over
producing firms, the competitive level of the industry judged through this force is
very low. Firms have an easier time setting price while buyers act generally as price
takers.
28. Suppliers if powerful can extract some of the profits that producing firms are
making off of consumers by raising the prices of raw materials. In the inputs market
for the cement industry, suppliers are concentrated - but buyers are also
concentrated. This means that initial bargaining is practically on equal footing.
Suppliers of cement industry are divided into two categories – 1.Suppliers of
transportation and 2.Suppliers of raw materials (clinker). Cement manufacturers
have argued that price hikes in the cement industry are due to increases in the price
of both transportation and raw materials. This means that suppliers are powerful
enough to force new process to the cement industry. However, the weakness of the
final product. In general suppliers are powerful if there is a credible forward
integration threat (suppliers can buy producing firms), suppliers are concentrated
(no switching opportunity), the cost is prohibitive to switch suppliers, and if a
supplier can rally up the final consumer. In this case of cement the power of
suppliers comes from their concentration regionally and from the high cost in
switching between suppliers. It is not easy for a cement firm to buy clinker from
china and ship it to India or vice versa. This means that local raw material
production must be utilized and that local or regional suppliers have high barraging
power.
High barriers to entry mean that firms already in the industry do not fear
outside competition. That means rivalry amongst firms is not intense. In fact
incentives for intra-industry cooperation or backhanded collusions such as cartels
are highly plausible. Barriers to exit on the other hand means that firms already in
the market are locked in. This can result from the firm's inability to sell the assets if it
decides to leave the industry. Barriers to entry and exit can be seen in four different
ways. First, government creates barriers by limiting the number of licenses it sells for
production. Cement is energy intensive as wee as highly polluting; therefore entry to
such 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 create
difficulties for firms to enter. However, the cement industry is not a patent
dependent industry, unlike other industries such as pharmaceuticals. Third, assets
29. needed to produce cement cannot be easily utilized for another industry (the cement
industry is highly asset specific). This means that if a firm decides to enter into the
market 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 fixed
costs require minimum efficient scale of production that creates a strong barrier to
entry. Overall, the cement industry has high barriers to entry and high barriers to
exit.
30. Note: The above diagram explains Porter's 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 an
opposing 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 vertical
supply chain has pricing power over final consumers, whereas the horizontal
dimension of competition is lacking due to lack of the possibility of differentiated
advantages in production. Inelastic demand neutralizes the consumer power
associated with product standardization, whereas proximity of raw materials to
production sites generates regional cement clusters.
EVALUATION OF CEMENT INDUSTRY –
Era Year Remarks about capacity, Growth, Consumption
Dominant
Imports
1914-1924 Cement consumption was around 2 million tonnes during this
period of 10 years; 50 % was through imports. Production in
the year 1914 was 10,000 tonnes and in 1924 production was
around 0.26 million tonnes a year against capacity of half
million tonne.
Struggle and
Survival
1924-1941 Indigenous production went from 3.66 lakh tones in 1925 to
18.30 lakh tonne in 1941. Imports contributed to less than 7 %
of total cement consumption during 1924-1942.
Price in
Control
1942-1951 Production stepped up from 1.8 million tonnes in 1942 to 3.28
million tonnes in 1951. Imports dwindled to less than 2 % of
total consumption.
Planning and
Control
1951-1982 Growth in cement capacity but not at requisite pace. Capacity
was 29.26 million tonnes in 1981-82.
Partial
Decontrol
1982-88 Quantum jump in capacity and production during 1982-88.
(57.47 Million tonnes in 1987-88) Cement became surplus from
1987 onwards.
31. Total Decontrol March
1989
onwards
During the period 2009-10 capacity rose to 236 million tonnes.
The industry structure changed over the years. During the year 1914-24 most
of the requirement was met through imports before indigenous production started.
Subsequently Government played a major role in Planning & Control. After the
industry was decontrolled the capacity grew manifold and by the end of 2009 the
annual capacity was around 219 MT. The selling strategy of firms and the buying
behaviour of customers also saw a major change. Cement from being a pure
commodity dependent on price alone is being recognized as a product who’s pricing
and demand could be varied through various marketing promotions. Brands started
emerging after total decontrol in the year 1989 and certain brands started
commanding premium due to quality perceptions. Therefore positioning of cement
brands in the customers minds play a vital role.
Globalization of Indian Cement Industry
The Globalization of Indian Cement Industry has helped the industry to
restructure itself to cope up with the alterations in the global economic and trading
system. The Indian cement industry is one of the oldest industries. It has been
catering to India's cement requirements since its emergence during the British Raj in
India. Though the majority of the players in the Indian cement industry were private
sector organizations, the industry was highly regulated.
With the rapid growth rate of the Indian economy after the 1990s, the
infrastructural developments within the country has been tremendous. The increase
in the construction activities has led to the increase in the demand for updated
quality building materials and other allied products. Cement being one of the major
elements 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 the
globalization of Indian cement industry many foreign cement manufacturers are
32. engaging themselves in agreements and deals with their India counter parts to have
a share of the growth.
Globalization of Indian Cement Industry includes several foreign companies
engaging in mergers and acquisitions of Indian cement companies, like
• Heidelberg Cement - Indorama Cement Ltd. Heidelberg Cement Company
entered into an agreement for a 50% joint venture with the Indorama
Cement Ltd., situated in Mumbai, originally possessed by the Indorama S
P Lohia Group. Heidelberg Cement Company is the leading German
cement manufacturing company. The Heidelberg Cement was set up in
1873 and has a long and prosperous history. Being one of the best in the
world the Heidelberg Cement Company has its bases in different
countries. The Heidelberg Cement Company has two manufacturing units
in India. A grinding plant in Mumbai and a cement terminal near
Mumbai harbor. A clinker plant is coming up in the state of Gujarat
• Holcim Cement - Gujarat Ambuja Cements (GACL) Holcim Cement signed
an agreement of 14.8% take over with the Gujarat Ambuja Cements
(GACL). With new products, skilled personnel, superb management, and
an outstanding market strategy gives this tie up good edge over the other
competitors. Holcim Cement Company is among the leading cement
manufacturing and supplying companies in the world. It is one of the
major employers in the world; having a work force of 90,000.The Holcim
Cement Company has units in excess of 70 countries all over the world.
• Italcementi cement - Zuari Cement Limited Italcementi Cement Company
with the help of the Cements Français, a subsidiary for its global activities,
has acquired shares of the famous Indian cement manufacturer - Zuari
Cement Limited. The acquisition was of 50% shareholding and the deal
was of about 100 million Euros. Italcementi Cement is the 5th largest
cement manufacturing company in the world. The production capacity of
the Italcementi cement company is about 70 million tons in a year. With
the construction boom in India the company looks for a stable future. In
2001 the Italcementi cement entered the Indian market scenario. It took
33. over the plant of the Zuari Cement Limited in Andhra Pradesh in
southern India. The joint venture earned revenues of around 100 million
Euros and an operating profit of 4 million Euros.
• Lafarge India is the subsidiary of the Lafarge Cement Company of France. It
was established in 1999 in India with the acquisition of the Tisco and the
Raymond cement plants. Lafarge Cement presently has three cement
manufacturing units in India. One of them is in Jharkhand which is used
for the purpose of grinding and the other two are in Chhattisgarh used for
manufacturing. The Lafarge Cement Company was set up in the year 1833
by Leon Pavin. Lafarge Cement Company situated in France is the leading
cement producing company in the world. It has plans for increasing the
cement production through technological innovations and maximization
of the capacity of the plant. It has a large network of distributors in the
eastern part of India. The Lafarge Cement Company is presently
producing 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 production
of cement (90%) in the country is by large plants (40).
• One of the other defining features of the Indian cement industry is that
the location of limestone reserves in select states has resulted in it’s
evolving in the form of clusters.
• Since cement is a high bulk and low value commodity, competition is also
localized because the cost of transportation of cement to distant markets
often results in the product being uncompetitive in those markets.
• Another distinguishing characteristic comes from it being cyclical in
nature as the market and consumption is closely linked to the economic
and climatic cycles. In India, cement production is normally at its peak in
the 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 large
players are able to withstand the downturn in demand due to their
economies of scale, operational efficiencies, centrally controlled
distribution systems and geographical diversification.
Cement Capacity, Production and Utilization in India -
In India, after the adaption of price decontrol policy for cement industry, it
has been showing phenomenal growth since early 1980's. In 1950-51 the capacity was
3.28 MT. And surged to a capacity of 296.48 MT in 2010-11. Similarly, production of
cement increased from 2.20 MT in 1950-51 to 216.28 MT in 2010-11. Capacity
utilization, 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.)
Capacity
Utilization (%)
1950-51 3.28 2.2 67
1955-56 5.02 4.6 92
1960-61 9.3 7.97 86
1965-66 12 10.97 91
1973-74 19.76 14.66 74
1978-79 22.58 19.42 86
1984-85 42 30.13 72
1989-90 61.37 45.42 74
1996-97 105.26 76.22 72
2001-02 145.99 106.9 73
2006-07 177.83 161.66 91
2007-08 209.4 172.31 82
2008-09 230.61 185.61 80
2009-10 276.77 204.95 74
35. 2010-11 296.48 216.28 73
1950-51
1955-56
1960-61
1965-66
1973-74
1978-79
1984-85
1989-90
1996-97
2001-02
2006-07
2007-08
2008-09
2009-10
2010-11
0
50
100
150
200
250
300
350
0
10
20
30
40
50
60
70
80
90
100
3.28
5.02
9.3
12
19.76
22.58
42
61.37
105.26
145.99
177.83
209.4
230.61
276.77
296.48
2.2
4.6
7.97
10.97
14.66
19.42
30.13
45.42
76.22
106.9
161.66
172.31
185.61
204.95
216.28
67
92
86
91
74
86
72 74 72 73
91
82 80
74 73
Capacity (M.t.) Production (M.t.) Capacity
Utilization (%)
`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 in
the market. Although the pace of capacity additions has slowed down considerably,
the demand-supply mismatch that has already been created in certain regions may
continue for few quarters thereby affecting cement prices and realizations
TYPES OF CEMENT -
The types of cement in India have increased over the years with the
advancement in research, development and technology. The Indian cement industry
is witnessing a boom as a result of which the production of different kinds of cement
in India has also increased.
Ordinary Portland cement (OPC) -
36. This type of cement is manufactured in the form of different grades, the most
common in India being Grade-53, Grade-43, and Grade-33. OPC is manufactured by
burning siliceous materials like limestone at 1400 Degree Celsius and thereafter
grinding it with gypsum. OPC gives enough comprehensive strength after soaking
in water for 3 days, 7 days, and 28 days. This is suitable for all types of modern civil
engineering construction.
Portland Blast Furnace Slag Cement -
Blast furnace slag, which is a waste product of the pig iron furnace, can be
used to produce slag cement. However, blast furnace slag does not have
cementitious properties if it is cooled slowly and ground finely; hence, it is cooled
quickly or quenched and subsequently ground to acquire cementitious properties.
The quenching process is called "granulation", and the slag is known as granulated
blast furnace slag. Granulated blast furnace slag is mixed with lime or OPC clinker
and ground to form slag cement. Portland blast furnace slag cement (PBFSC) is the
most widely used slag cement, and contains 25-65 percent of slag, 5-6 percent of
gypsum and Portland cement clinker. Apart from having OPC properties, PBFSC
has other properties such as lower heat of hydration and higher sulphate resistance.
Super sulphate cement, another type of slag cement, is prepared by grinding
granulated slag, anhydrite and clinker in the proportion of 70:15:15. This cement is
more sulphate-resistant than PBFSC or SRC.
Portland Pozzolana Cement (PPC) -
It is greyish in colour and made by grinding of lime stone and clay. Burning
of lime stone and clay at very high temperature and cooling the resultant product is
called clinker, grinding the clinker with of gypsum in ball mill to a finally ground
powder. This is known as Portland cement. This cement is produced by adding 10 –
25 % pozzolanic materials to the OPC clinker then grinding together. PPC is
manufactured by blending pozzolanic materials, OPC clinker, and gypsum either
grinding them together or separately. Today PPC is widely in demand for industrial
and 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 rate
of early high strength is required. RHPC has a higher rate of strength development
than the Normal Portland Cement. This type of cement gives the desired strength in
3,7 and 28 days, if soaked in water. But sometimes cement is required high strength
in 24 hours as is given by ordinary Portland cement at 3 days. This sets and hardens
much 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 developing
contraction cracks are minimized. This can be done either by adding some
pozzolanic material and granulated blast furnace slag to the cement while grinding
or by changing the chemical composition of the cement.
Hydrophobic Cement -
It is obtained by adding water repellent firm forming substance such as
Stearic Acid and Oleic Acid by grinding Portland Cement Clinker. This type of
cement reduces wetting ability of cement grains. Hence it impact more time for
mixing transporting compacting & finishing etc.
White Cement -
White Cement has registered growth in production and sale in India in the
last few years. The white cement sector has been growing at the rate of 11 % per
year. This has given the Indian cement industry a major boost. White cement is
Portland cement made from specially selected raw materials, usually pure chalk and
white clay, containing very small quantities of iron oxides and manganese oxides.
The chemical complexes formed with iron oxide present in the cement raw meal give
OPC cement its grey colour. However, if the proportion of iron oxides is reduced to
less than 0.4 percent, cement becomes white in colour. Iron oxide improves the
burning 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 in
which the quantity of tricalcium aluminates is less than 5 % of C3A. It can be used
for purposes wherever PPC, Slag cement, and OPC are used. The use of Portland
Sulphate Resisting Cement has proved beneficial, particularly in conditions where
there is a risk of damage to the concrete from sulphate attack. SRPC is recommended
in places where the concrete is in contact with the soil, ground water, exposed to
seacoast, and sea water. In all these conditions, the concrete is exposed to attack from
sulphate that is present in excessive amounts, which damage the structure.
Quick Setting Cement -
The percentage of gypsum added is reduced, which accelerate the setting
action of this cement is very fast. This type of cement is used for the underwater
construction where pumping is involved.
Oil Well Cement (OWC) -
As the name suggests, is used for the grouting of the oil wells, also known as
the cementing of the oil wells. This is done for both, the off-shore and on-shore oil
wells. As the number of oil wells in India is increasing steadily, the sales of Oil Well
Cement have also increased. This has boosted the India cement industry to a large
extent.OWC is manufactured from the clinker of Portland cement and also from
cements that have been hydraulically blended. OWC can resist high pressure as well
as very high temperatures. OWC sets very slowly because it has organic retarders
which prevent it from setting too fast.
Clinker Cement -
The cement industry in India is highly technologically intensive and as a
result, the quantity of clinker cement that is produced in India is of a very high grade
and is often considered among the best in the world. The production of clinker
cement requires a lot of energy because it needs to be manufactured at the
temperature of round 1400-1450 degree celsius.
Expansive Cement/ Shrinkage Compensated Cement -
Concrete prepared from Portland cement or blended cement shrinks on
setting 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 filling
cracks. This cement is prepared by increasing the proportion of gypsum and
aluminous cement clinker to Portland cement clinker while grinding.
Super high strength cement -
This type of cement is required for urgent repairs of important concrete
structures like foundation pillars. It is prepared in jet mills by finely grinding
portland cement clinker with higher proportion of tricalcium silicate.
Trends in Variety wise cement production -
Year OPC PPC PBFS SRC IRSC 40 Others Total
VIII Plan
1992-93 36.47 8.33 5.37 - - 0.55 50.72
71.91% 16.42% 10.59% - - 1.08%
1993-94 38.69 9.24 5.3 0.03 0.01 0.82 54.09
71.53% 17.08% 9.80% 0.06% 0.02% 1.51%
1994-95 41.18 10.69 5.83 0.22 0.05 0.38 58.35
70.57% 18.32% 9.99% 0.38% 0.09% 0.65%
1995-96 45.04 11.77 7.10 0.25 0.05 0.32 64.53
69.80% 18.24% 11.00% 0.39% 0.08% 0.49%
1996-97 48.45 13.60 7.33 0.20 0.08 0.31 69.98
69.25% 19.43% 10.48% 0.29% 0.11% 0.44%
IX Plan
1997-98 54.30 14.48 7.45 0.19 0.06 0.26 76.74
70.76% 18.87% 9.71% 0.24% 0.08% 0.34%
1998-99 57.40 15.57 8.21 0.21 0.06 0.22 81.67
17.28% 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
41. Production of different varieties of cement for the year April 2010 – March 2011 as a
percentage to total is as given -
Type of Cement % of Total Production
Ordinary Portland Cement 32.26
Portland Pozzolona Cement 60.79
Portland Blast Furnace slag Cement 6.6
Sulphate Resistant Cement 0.07
IRS T40 0.24
The type of cement that is manufactured in huge quantity is the Portland Pozzolona
Cement (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, which
are weighed and batched at a centrally located plant and directly placed at the
construction site without undergoing any further treatment. The operations are
carried in factory like conditions and are completely automated. Hence, RMC is a
value-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 due
to import of basic equipment and machinery.
• Smaller size of construction in unorganized sector highly competitive and cost
conscious.
• Availability of abundant cheap labour for making and transporting concrete.
• Differential taxation between RMC and SMC. Especially before 1997 when
excise 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 totally
eliminated
• Lower labour and supervisory costs
• Minimisation of cement wastage through bulk handling and storage.
• Cleaner working environment.
• Eco-friendly product
Manufacturing Technology Status -
Raw material Preparation Process – Currently mining is generally done with semi-
mechanized methods. Computerized mine lining is now being used by few modern
plants. Most of the crushing operation is performed with multistage crushers of
small capacity. New plants are now shifting to single stage impact crushers.
Transportation of the material from the mines is generally with dumpers. Some of
the plants are now shifting to belt conveyors using in pit crushing. Grinding
technology has progressed from the use of open circuit ball mills to close circuit ball
mills with high efficiency separators and improved mill internals. Vertical roller
mills have now firmly established themselves for these operations. Use of
computerized on line X-ray analyzers for raw mix optimization has become an
essential feature for modern plants.
Burning Process – All plants commissioned after 1970 have been on dry process
kilns. From conventional 4-stage pre heater kiln system the current trend has been
towards New Suspension Pre heater (NSP) kilns with pre calcinatory having 5-stge
pre heater systems. Of the total capacity 44 % is accounted by NSPO kilns, 25 % by
SP kilns, and 16 % by long wet process kilns and balance by other. Most of the
modern plants have now adopted computerized kiln control system with few of
them having gone for expert systems.
43. Clinker Grinding – Currently most of the plants are using lose circuit ball mills for
cement grinding with mechanical separators. Many are shifting to high efficiency
separators, improved mill internals and modified flow control diaphragms.
Present Status of Technology of Indian Cement Industry -
Pre 1970 Plants 1970-90 Plants 1990 onwards
Plants
Global
Technology
Mining &
Material
Handling
Conventional Conventional Computer aided
and
surface miners
Computer aided
and
surface miners
Crushing Two stage Two stage Two stage in-pit
crushing&
conveying
In-pit crushing &
conveying
Limestone
Conveying
Dumpers/
Ropeway/
Tippers
Belt conveyors Belt conveyors,
Pipe conveyors
Pipe conveyors
Belt conveyors
Grinding Ball mills
with / without
Conventional
classifier
Ball mills,
VRM's,
Roller presses
with
static/dynami
c classifier
Ball mills with
improved
classifier, VRM's,
Roll presses, with
conventional and
dynamic classifier
Ball mill with
improved
classifier, VRM's,
roll presses, horo
mills with
dynamic classifier
Pyro processing Wet
- single channel
burner
Wet
Semi dry
Dry
- 4 stage pre
heater
-conventional
cooler
- single
Dry
-5/6 stage pre
heater
-high efficiency
cooler
-multi channel
burner
-co-generation of
Dry
-5/6 stage pre
heater
- High efficiency
cooler
- Multi channel
burner
-lownox calciner
44. channel
burner
power
-co processing of
WDF
-co-generation of
power
-co-processing of
WDF
-low NO x/SO2
emission
technologies
Blending &
Storage
Pre-blending
Batch blending
silos
pre-blending -continuous
blending
-multi chamber
silos
-continuous
blending
-multi hamper
silos dome silos
Packing &
Dispatch
Bag Bag Bag/Bulk Bulk
Palletizing &
Shrink Wrapping
Process Control Relay logic/
Hard Wired
Fuzzy logic
control
System
Micro processor
based DDC
Neurofuzzy expert
system
Micro processor
based DDC
Neurofuzzy
expert system
Plant size, TPD 300-600 600-3000 3000-12000 6000-12000
Inputs 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. Generally
limestone is available of an average size of about six inches and after feeding into the
crusher its sizes is reduced into small chips of half an inch. Since, the plants near
limestone deposits pay less transportation cost than others; the location of cement
plant is determined by the location of limestone mines. The total limestone deposit
in the country is estimated to more than 90 billion tonnes, with Andhra Pradesh
enjoying 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 dual
function. It is a fuel and raw material and the consumption of coal in a typically dry
process system ranges from 20-25 % of clinker production. This means for per ton
clinker produced 0.20-0.25 ton of coal is consumed. The cement industry consumes
about 10 million tonnes of coal annually and is the fourth largest user of coal after
steel, power and railways. Since coalfields like Bharat Coking Coal Limited (BCCL),
Central Coalfields Limited (CCL) supply poor quality coal, the industry has to blend
high-grade coal with it. However, non-coking coal and petroleum coke attracts a
customs duty of 5%, which increases the cost of production in the sector.
Power – Cement industry consumes about 5.5 billion units of electricity annually
with one tonne of cement requiring approximately 120-130 units of electricity. Since
state governments supply electricity in India and since different states have different
tariff structure, the power tariffs vary according to the location of the plant and on
the production process. Most of the cement producing states such as Andhra
Pradesh, 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 its
input materials and output have to be transported to and from the plants. Cement is
mostly packed in paper bags now. It is then transported either by rail or road. Road
transportation beyond 200 kms is not economical therefore about 55 % cement is
carried by the railways. Due to the inadequate of wagons there is a need to
46. encourage transportation through sea. Today, 70 % of the cement movement
worldwide is by sea compared to 1 % in India.
CEMENT MANUFACTURING PROCESS-
47.
48. There are two general processes for producing clinker and cement in India – a
dry process and a wet process. In general, the dry process is much more energy
efficient than the wet process, and the semi-wet somewhat more energy efficient
than the semi-dry process. The semi-dry process has never played an important role
in Indian cement production. Over the last decade, increased preference is being
given to the energy efficient dry process technology so as to obtain a cost advantage
in a competitive market. Moreover, since the initiation of the decontrol process,
many manufactures have switched over from the wet technology to the dry
technology by making suitable modifications in plants. Due to new, even more
efficient technologies, the wet process is expected to be completely phased out in the
near future. In 1960, around 94% of the plants in India used wet process kilns. These
kilns have been phased out over the past 46 years and at present, 97 % of the kilns
are dry process, 2 % are wet, and only 1 % are semi-dry process.dry process kilns are
typically larger, with capacities in India ranging from 300-8,000 tonnes per day or
tpd. While capacities in semi-dry kilns range from 600-1200 tpd, capacities in wet
process kilns range from 200-750 tpd.
Process Wise Capacity in Indian Cement Industry (%) -
Year Wet
Process
Dry
Process
Semi-
wet
Process
Total
1950-51 97 0 3 100
1960-61 94 1 5 100
1970-71 69 22 9 100
1980-81 61 33 6 100
1990-91 17 81 2 100
1991-92 16 82 2 100
1992-93 16 82 2 100
1993-94 12 86 2 100
1994-95 12 86 2 100
50. Dry Process – In dry process production, limestone is crushed to a uniform and
usable size, blended with certain additives such as bauxite, iron ore and discharged
on to a vertical roller mill where the raw materials are ground to fine powder. An
electrostatic precipitator deducts the raw mill gases and collects the raw meal for a
series of further stages of blending. The homogenized raw meal thus extracted is
pumped to the top of pre heater by air lift pumps. In the pre heaters the material is
heated to 750 degree celsius. Subsequently, the raw meal undergoes a process of
calcinations in a pre calcinatory. The remaining calcinations and clinkerization
reactions are completed in the kiln where the temperature is raised to 1,450 – 1,500
degree celsius. The clinker formed is cooled and conveyed to the clinker silo from
where it is extracted and transported to the cement mills for producing cement. For
producing 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 where
water is added to raw materials to produce slurry. The chemical composition is
corrected and the slurry is then pumped to the kiln where evaporation of moisture,
preheating, calcinations and sintering reaction takes place. The clinker is cooled and
transported, as in the ase of other plant, with suitable conveyors to cement mills for
grinding. The wet process is more energy intensive. And thus becomes expensive
when power and energy prices are high.
MAJOR PLAYERS IN THE INDIA:
TOTAL SALES for the year 2013 = Rs. 73600.81 Cr
Name of the
Company
Net Sales in
Cr. (2013)
Percentage
(%)
UltraTech Cem. 18270.69 24.82
ACC 11,357.96 15.43
Ambuja Cem. 9730.30 13.22
Shree Cement 5866.51 7.97
Prism 4503.11 6.11
India Cement 4203.40 5.71
Madras 3273.57 4.44
J K Cements 2544.96 3.45
Birla Corpn. 2289.46 3.11
51. Chettinad Cement 2059.90 2.79
HHI = 1211.415
HHI indicates moderate concentration that implies the size of the firm in
relationship 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 after
economists Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept
widely applied in competition law, antitrust and also technology management. It is
obtained by squaring the market-share of each of the players, and then adding up
those squares
The formula for this index is:
Where,
H = Herfindahl Index.
si = Contribution of each individual firm to Industry sales.
n = Number of firms
52. Here %S stands for the percentages of the market owned by each of the larger
companies, so that %S1 is the percentage owned by the largest company, %S2 by the
second, 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 a
single monopolistic producer. Increases in the Herfindahl index generally indicate a
decrease in competition and an increase of market power, whereas decreases
indicate 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 moderate
concentration.
• A HHI index above 0.18 (above 1,800) indicates high concentration
Sourcing
Cementitious
Materials
(mineral
components)
Others
55. 6%
3%
79%
4%
1%
1%
6%
Northern Region - Capacity - 2010-11
Mahayana/Haryana
Punjab
Rajasthan
Himachal Pradesh
Delhi
Jammu & Kashmir
Uttarakhand
Cement being
largely 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 will
be uneconomical. As it is freight intensive industry, the segment is completely
domestic driven and exports account for very negligible percent of the total cement
off take.
12%
41%
13%
13%
Region-wise Capacity - 2010-11
Eastern Region
Southern Region
Western Region
Central Region
57. 27%
73%
Central Region - Capacity - 2010-11
Uttar Pradesh
Madhya Pradesh
61%
39%
Western Region - Capacity - 2010-11
Gujarat
Maharashtra
58. Southern region in the country is the biggest contributor in cement
production 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 Ambuja
Cements Ltd having annual installed capacity of 25 MT.) As of 2010-11 comprised of
Northern region 51.56 MT, Eastern Region 29.14 MT, Western Region 30.52 MT and
Central Region 30.61 MT. Rajasthan, Andhra Pradesh, Tamil Nadu, Madhya Pradesh
and Gujarat are the prominent cement industry contributor states. The western and
northern 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 2010-11
Capacity (million tonnes)
North 33.77 47.47 50.27 48.77 51.56
East 25.34 28.98 31.28 27.09 29.14
South 54.1 61.81 79.5 92.11 96.56
West 29.27 32.17 32.72 28.62 30.52
Central 25.3 27.64 27.64 26.01 30.61
Grand Total 167.78 198.07 221.41 222.6 238.4
Regional Capacity as % of Total
North 20.13% 23.97% 22.70% 21.91% 21.63%
59. 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%
Regio
n
2006-07 2010-11
Capacit
y
Productio
n
Consumpti
on
Surplu
s
Capacit
y
Productio
n
Consumpti
on
Surplus
North 33.77 32.09 29.52 2.57 51.56 37.94 26.82 11.12
East 25.34 22.08 23.98 -1.9 29.14 23.16 28.11 -4.95
South 54.1 50.15 43.88 6.27 96.56 59.95 36.06 23.89
West 29.27 27.28 28.25 -0.97 30.52 21.71 31.35 -9.64
60. Centra
l
25.3 24.04 22.41 1.63 30.61 26.24 27.38 -1.14
Total 167.78 155.64 148.04 7.6 238.4 169 149.72 19.28
There exist regional surplus/shortages in the Indian cement industry. South
India leads in both cement production & consumption followed by North India. The
oversupply is largely in the southern and northern regions and there is a supply
shortage in eastern & western regions. There is significant inter-regional movement
of cement, which plays a crucial role in the regional demand supply dynamics. Most
of the cement movement across regions takes place from north to central, south to
west, 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 are
estimated to be approximately 95,623,07 million metric tonnes (MMT), of which
about 32 % of total reserves are found in state of Andhra Pradesh itself. Cement
industry is the largest consumer of limestone in India, accounting for over 70-80% of
total limestone that is mined out. For making cement, limestone with a minimum
CaO content of 44% is necessary. Typically 1.4-1.5 million tonnes of limestone is
required for producing 1 MT of clinker. Thus for a 1.0 MMT cement plant, assured
availability of cement grade limestone reserves of the order of 50-60 MMT in the
close vicinity is vital.
The Cement industry is fragmented into five different regions because of the
following reasons:
• Bulky nature of cement and limestone (key ingredient in manufacturing
cement) 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 cement
produced in a particular region is mainly consumed in that region.
61.
62.
63. Place of concentration of large cement plants & their Capacity –
The following table gives company wise Annual Installed Capacities
Company Plant No. of
Plants
Annual
installed
Capacity
(million
tonnes)
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 28.68
Birla Corp, Ltd Birla Vikas & Satna, Birla Cement &
Chanderia, Durgpur (G), Rae Bareli (G),
Durga Hitech (G)
7 5.78
CCI Ltd. Adilbad, Akaltara, Bokajan, Charkhi-Dadri,
Kurkunta, Mandhar, Neemuch, Rajban,
Tandur, Delhi (G)
10 3.85
Andhra Cements Vizag (G), Nadikude–Durga Cement 2 1.42
J.K. Group Nimbaher, Mangrot, Gotn, Muddapur,
Lakshmi Cement, Lakshmi cement – Kalol
(G)
6 12.27
Century Textiles Century Cement, Maihar Cement, Manikgarh
Cement
3 7.8
India Cement Sankarnagar, Sankaridurg, Chilamkur
Works, Dalavoi, Visaka Cement, Yerraguntla,
Raasi Cement, Vallur(G), Parli(G), Trinetra
Cement
10 15.85
Tamilnadu Cement Alangulam, Ariyalur 2 0.9
69. 2006-07
2007-08
2008-09
2009-10
2010-11
2011-12P
2012-13P
2013-14P
2014-15P
20
22
24
26
28
30
32
34
36
Eastern Region Capacity Trends
Year
Capacity(Mn.T)
3.55%
CAGR
New/Expansion Projects -
1. Chettinad Cement has been expanding its plants, with new plants in North
Karnataka and Andhra Pradesh. The company's expansion will increase
production capacity from 11.5 MTPA to an estimated 15 MTPA by 2015. The
company plans to construct an integrated cement unit with production
capacity of 3.5 MTPA in Guntur District, as well as a 2 MTPA grinding unit in
Visakhapatnam and also it is planning to open a 2.5 MTPA cement plant in
Karnataka and a grinding unit in Sholapur, Maharashtra.
2. Ambuja Cement plans to invest Rs. 2000 crore to enhance its cement capacities
in Rajasthan and northern region and it will add 5 MT capacity to the total
cement production of India.
3. Dalmia Cement plans to invest Rs 1800 crore to increase the company's
cement manufacturing capacity over the next 2 years. The company also plans
to set up a 2.5 MT Greenfield unit in Karnataka.
70. 4. Heidelberg Cement has commissioned Phase-I of its Jhansi grinding unit. The
company currently executing its Rs 1400 crore expansion with the capacity of
2.7 MT. The company also aims to accelerate the operational capacity at its
Dmoh plant in Madhya Pradesh to 6 MT.
5. India cements is planning to expand capacity at its Rajasthan unit, with
possible investment of Rs 650-700 crore. The present capacity of the plant is
1.3 MT and the company is planning to add one more line with similar
capacity. India Cement's current manufacturing capacity is 15.5 MT with
plants in Tamil Nadu, Andhra Pradesh and Rajasthan.
6. Vicat Group is likely to sell 4.5 million tonnes of cement in India. Apart from
the newly-commissioned Rs 1800 crore joint venture cement plant, Vicat-
Sagar Cement at Chattrasal, Gulbarga district of Karnataka, Vicat owns 51
percent stake in Bharati Cement.
7. Amrit Cement India Ltd (ACIL) is launching Amrut Cement in North-Eastern
market 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 in
Chhattisgarh with capacity of 2 MTPA and total estimated cost of Rs 6050
millions.
9. Shree Vinayak Cement Company belonging to the Sandhu group of
companies is planning to expand its grinding unit in Dhanbad, Jharkhand
with 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 cement
project – OPC/PPC/PSC cement plant (3.2 MTPA), Clinker plant (2 MTPA)
and Coal bsed captive power plant with total estimated cost of Rs 16000
millions.
Production Region-wise Trends in India -
71. The Indian cement industry currently supplies all most all the cementitious material
requirements of the Indian market from its manufacturing plants within India.
Cementitious materials include all types of cement and other materials sold to
supplement cement concrete.
In 2012, the Industry
• 183 large cement plants, over 365 mini cement plants and 42 players in the
industry.
• Current Capacity 324 MTPA and operates at 75-80 percent utilization.
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12P
2012-13P
2013-14P
2014-15P
140
145
150
155
160
165
170
175
180
185
190
All India Production Trends
Year
Production(Mn.T)
2.08%
CAGR
75. 2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13P
2013-14P
2014-15P
140
145
150
155
160
165
170
175
180
All India Consumption Trends
Year
Consumption(Mn.T)
1.32%
CAGR
china
world
india
0 200 400 600 800 1000 1200 1400 1600
1390
396
156
Per Capita Cement Consumption (in kgs)
Indian cement industry an attractive investment destination with the
combination of a lower per capita consumption and a faster growth rate. The Indian
cement Industry has registered a production of more than 100 million tonnes since
2001-02. Despite having high demand in India. Per capita cement consumption is
very low, where the world average is 396 kg, in India being the country of young
76. population has a huge potential and its ushering social & economic base will
improve the domestic consumption.
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12P
2012-13P
2013-14P
2014-15P21
22
23
24
25
26
27
28
29
30
Central region Production Trends
Year
Production(Mn.T)
2.21%
CAGR
80. Cement industry in India comprises of around 183 large cement plants with a
combined installed capacity of around 318 MTPA and more than 365 mini cement
plants. Large producers contribute about 90% to the installed capacity while mini
plants account for the rest. Among these, 98% of the capacity is in the private sector
and the rest in the public sector. Maximum numbers of cement plants are located in
Andhra Pradesh, which were 37 large cement plants with a total capacity of 68
MTPA.
Cement industry in India had made great progress in technological up-
gradation and assimilation of latest technology presently, about 97 percent of the
total capacity in the industry is based on modern and environment friendly dry
process technology.
Despite higher cement prices realized occasionally, the margins continue to be
under severe pressure particularly over the last couple of years due to steep hike in
cost of all major inputs like raw material, fuel, power and freight, which together
account for around 70 percent of the cost of production
Projects -
1. The public works Department (PWD) is to execute road development projects
across Kerala in the next 3 years. The cost of the project is estimated to be Rs
10,600 crore and involves construction of phase – II of the Kerala state
Transport project worth Rs 2,005 crore, Rs 3500 crore thiruvananthapuram
model road development project involving seven cities and construction of
1,204 KM network worth Rs 5,100 crore.
2. Godrej properties is going to launch a commercial project at Bandra – Kurla
Complex in Mumbai, the project involves construction of a commercial
building at cost of Rs 2,000 – 2,500 crore and will be spread across 1.3 million
square feet. Godrej properties expect to complete the construction of the
building by 2015.
3. The Union government cleaned 3000 km of new projects to the country's six
prime states. The projects will be executed at Gujarat, Maharashtra, Madhya
Pradesh, Uttar Pradesh and two north eastern states.
81. 4. The Union government has sanctioned the construction of strategic border
roads in the Indo-China region. The project involves construction of 27
strategic border roads at a cost of Rs 1937 crore.
5. The central government has approved Rs 820 crore for developing road
networks in Assam. The project is being implemented under the Pradhan
Mantry Gram Sadak Yogna (PMGSY) and involves construction of 689 KM of
roads and 347 bridges.
6. The states of Andhra Pradesh and West Bengal are all set to get two new port
projects. The new ports will add capacity of 100 MT.
DEMAND AND SUPPLY SCENARIO OF CEMENT INDUSTRY
Demand sources
The demand for cement in India has been influenced mainly by the Housing,
Infrastructure, Irrigation, Roads and Defence. The following diagram shows the
contribution of the important demand driven factors:
82. Housing 53.00%
Infrastructure 15.00%
Irrigation 23.00%
Roads 5.00%
Defense 4.00%
Sector wise Demand Contribution
DEMAND FROM RESIDENTIAL HOUSING SECTOR
Housing demand accounts for 53% of total cement demand and 90% of total real
estate demand. Housing demand has supported the cement industry even in times
of low infrastructure or industrial demand.
The growth in the residential real estate market in India has been largely driven by
rising disposable incomes, a rapidly growing middle class, low interest rates, fiscal
incentives on both interest and principal payments for housing loans and heightened
customer expectations, as well as increased urbanisation.
A large proportion of the demand for houses, especially in urban centres such as
Mumbai, Bangalore, Delhi (Gurgaon, Noida), Hyderabad and Pune, is likely to come
from high-rise residential buildings. Since this is a fairly new segment, the growth of
the high-rise segment will be faster as compared to the growth of the urban housing
segment. The reasons for the construction of high rise apartment buildings are the
lack of space in cities and proximity to offices and IT parks.
• Growth Drivers
83. o Favourable demography and higher disposable income
o Continued growth in population and change in population profile.
o Decrease in number of people per household with breakdown of the joint
family system into nuclear families.
o Fiscal incentives provided by Government and easy availability of finance.
o Growth in Tourism.
DEMAND FROM INFRASTRUCTURE SECTOR
The 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 as
roads, railways, irrigation, power, water supply urban infrastructure, ports and
airports. However, in order to achieve this kind of growth on a sustainable basis, a
further impetus is required to be given to the Infrastructure development in the
country. GOI, recognizing this fact has planned to spend around INR 73,793 crores
on infrastructure development for the next five year.
Out of total proposed expenditure, a construction activity are expected to account
for more than 50% of total investment and is expected to be the biggest beneficiary of
the surge in infrastructure investment over the next five years.
This would imply a construction opportunity will more in the next 5 years. In light
of such huge expenditure on construction activities, the demand for cement from
infrastructure sector is expected to grow.
DEMAND FROM INDUSTRIAL AND COMMERCIAL SECTOR
Commercial construction comprises construction of office space, hotels, hospitals,
schools, stadiums etc. In India, most of the investment in this segment is driven by
office space construction. Within office space construction activity, almost 70-75 per
cent of the demand comes from IT/BPO/call centres. The other key demand drivers
include banking and financial services, FMCG and telecom.
This dependency on IT/ITES is expected to continue due to India’s emergence as a
preferred outsourcing destination, despite China and Russia also emerging as strong
84. contenders. The industrial and commercial sector comprises of all the major
industrial set ups, commercial offices, IT & ITES parks and organized retail formats.
The increase in disposable incomes, demographic changes (such as the increasing
number of working women, who spend more, the rising number of nuclear families
and higher income levels within the urban population), the change in the perception
of branded products, the growth in retail malls, the entry of international players
and 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% driven
by large-scale construction activities.
Details of PPP projects by Sector-
Sector Projects in Pipeline Projects Under Implementation
No. of
Projects
Projet Cost
(Rs. Cr)
No.of
Projects
Project Cost(Rs.
Cr)
Roads 167 115822 133 102775
Ports 47 35902 50 62058
Airports 7 4120 3 19277
Railways 53 90312 5 5217
Power 34 62032 15 29448
Urban
Infrastructure
65 45708 69 18690
Other 31 22534 17 3575
Total 404 376430 292 241040
Overall Demand
Driven by a strong residential housing demand, growing industrial and commercial
activities and the continued momentum in infrastructure investment, the cement
consumption is expected to witness a CAGR of more than 10% in line with the
economic growth because of the strong co-relation with GDP and the increased
activity in the construction sector. We further believe that due to huge expenditure
by GOI on infrastructure the proportionate demand from infrastructure sector will
move northwards and we expect the total share of cement demand from
infrastructure will increase in coming years.
85. DEMAND-SUPPLY MISMATCH
Though India is the second largest cement manufacturer, it is among the lowest
cement consuming countries. In India per capita cement consumption is 156 kg,
which is far below the world average of approximately 396 kg. Hence, the cement
industry has been in a surplus position since a long time.
There exist regional surplus/shortages in the Indian cement industry. The
oversupply is largely in the Southern and Northern regions. By contrast, there is a
supply shortage in Eastern and Western regions. There is significant inter-regional
movement of cement, which plays a crucial role in the regional demand-supply
dynamics. Most of the cement movement across regions takes place from North to
Central, 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 cement
company and largest producer of cement in India. Also, ACC limited is a major
player in the area of ready mix concrete company. ACC limited has substantially
held the market leadership and they achieved the sales volume of 24.11 MT cement
in the year 2012. Company's headquarter is located in Mumbai and has 16 cement
86. manufacturing plants within the country with 21 sales offices and several zone
offices employing more than 9000 people. The Mumbai based company is also the
largest user of limestone for its high volume operations in the field of mining.
Dec'08 Dec'09 Dec'10 Dec'11 Dec'12
Net Sales 7229.97 8021.59 7647.77 9348.26 11357.96
PAT 1177.38 1588.43 935.02 996.45 1086.42
Profitability
Trend
16.28% 19.80% 12.23% 10.66% 9.57%
Dec'08 Dec'09 Dec'10 Dec'11 Dec'12
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
16.28%
19.80%
12.23%
10.66%
9.57%
ACC Ltd
Profitability Trend
UltraTech Cement -
Ultratech Cement is Indi's largest cement company. Part of the Aditya Birla
Group the company has annual capacity of 72 million tonnes. The company has an
employee 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 it's
87. white cement under the brand name of Birla White. The company the biggest
manufacturer of cements in India and 15 the biggest in the world.
Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
Net Sales 5512.43 6385.5 7042.82 13205.64 18270.69
PAT 1007.61 977.02 1093.11 1278.71 2394.67
Profitability
Trend
18.28% 15.30% 15.52% 9.68% 13.11%
Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
UltraTech Cement
Profitability Trend
Ambuja Cements -
Ambuja Cement a company founded in 1983 by NarotamSekhsaria and
Suresh Neotia. The company has five integrated cement plants and eight grinding
units across the country. The company is also a part of the Halcim Group and has a
capacity to produce about 27 MT of cement per annum and is a benchmark for
cement industries in India. The company has three captive terminals on the west
coast to timely deliver the order of the customers.
Dec'08 Dec'09 Dec'10 Dec'11 Dec'12
Net Sales 6182.09 7083.21 7371.52 8473.14 9730.3
88. PAT 1390.99 1198.25 1202.66 1158.5 1295.18
Profitability
Trend
22.50% 16.92% 16.31% 13.67% 13.31%
Dec'08 Dec'09 Dec'10 Dec'11 Dec'12
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Ambuja Cement
Profitability Trend
Shree 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 in
North India. The company has plants located in baewar, Ras, Suratgarh and
Khsuhkhera and other places. The company has a different strategy, it sells its
brands 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 MW
of installed power capacity, providing a steady stream of cash flows. Presently the
company is planning to expand further at a similarly aggressive pace in present
regions of operations and new regions.
89. Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
Net Sales 2108.21 2716.47 3628.2 3498.89 5866.51
PAT 274.48 571.43 659.41 147.81 543.75
Profitability
Trend
13.02% 21.04% 18.17% 4.22% 9.27%
Mar'08 Mar'09 Mar'10 Mar'11 Mar'12
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Shree Cement
Profitability Trend
Prism Cement -
Prism cement plant is located at Mankhari in Satna district, which is largest
solitary kiln cement plant in the country. Company has earned the respect of
investors and potential growth in cement manufacturing made one of the top cement
manufactures in the country. The company produces excellent quality of cement and
thus is a premium price segment company. The company is ISO certified and every
product manufactured by the company carries the BIS certification. The quality of
the cement produced makes it a preferred choice in high-rise buildings, bridges,
pipes, poles and manufacturing AC sheets.
Jun'08 Mar'09 Mar'10 Mar'11 Mar'12
