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Cement Industry - India

Overview 1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar with a capacity of 1000 tonnes 2. Currently India is ranked second in the world with an installed capacity of 114.2 million tonnes. Industry estimated at around Rs. 18,000 crores (US $ 4185 mn) 3. Current per capita consumption - 85 kgs. as against world standard of 256 kgs 4. Cement grade limestone in the country reported to be 89 bt. A large proportion however is unexploitable. 5. 55 - 60% of the cost of production are government controlled 6. Cement sales primarily through a distribution channel. Bulk sales account for < 1% of the total cement produced. 7. Ready mix concrete a relatively nascent market in India Cement Industry : Structure Installed capacity 114.2 mn tonnes per annum (mntpa) Production around 87.8 mn tonnes Major cement plants Companies : 59 Plants : 116 Typical installed capacity per plant : Above 1.5 mntpa Total installed capacity : 105 mntpa Production 98-99 : 81.6 mntpa Excise :Rs. 350/ tonne All India reach through multiple plants Export to Bangladesh, Nepal, Sri Lanka, UAE and Mauritius Strong marketing network, tie-ups with customers, contractors Wide spread distribution network . Sales primarily through the dealer channel Mini cement plants Nearly 300 plants Located in Gujarat, Rajasthan, MP Typical capacity < 200 tpd Installed capacity around 9 mn. Tonnes Production around : 6.2 mn tonnes Excise : Rs. 200/ tonne Mini plants were meant to tap scattered limestone reserves. However most set up in AP Most use vertical kiln technology Production cost / tonne - Rs. 1,000 to 1,400 Presence of these plants limited to the state Infrastructural facilities not the best


Private housing sector is the major consumer of cement (65%) followed by the government infrastructure sector at 15% 9down from 20%) < 1% of the cement produced is sold in bulk form unlike US & Japan Production Excess capacity exists, though some units are sick 99 - 2000 production expected to reach 95 mn tonnes ] Exports around 2 mn tonnes Cement manufactured through the wet, semi-dry or dry process. Dry process accounts for 90% of the installed capacity Wet process popular in the past - better control over mixing of raw material Dry process replacing wet process as it is space saving energy efficient and economical

Prices Price fluctuations high Essentially determined by demand Prices also vary with grades


Over 370 companies in the organised sector However, industry dominated by 20 companies who account for over 70% of the market Individually no company accounts for over 12% of the market

Regional Major clusters

Satna, MP (11.77 mntpa) Chandrapur, Maharashtra/ AP (9.59


Plants located close to limestone centres Resulted in cross regional movement 80% of the production consumed within the states except
Madhya Pradesh

Gulbarga, Karnataka/ AP (6.83


Yerranguntla, AP (1.9 mntpa) Nalgonda, AP (5.85 mntpa) Bilaspur, MP (9.7 mntpa) Chandoria, Rajasthan/ MP (7.03

Non cluster (47.60 mntpa)

Ready Mix Concrete : Industry RMC - ready to use concrete, a blend of cement, sand and aggregate and water mixed in convenient proportion Launched first in Mumbai a few years ago is gaining ground in other metros in India Typical cost of a plant - Rs. 7-8 crs (US $ 1.6 to 1.8 mn) to set up a 100 cubic metre (cu m)plant with 4-5 transit mixers. Gestation period is around 3-4 months. Currently RMC is at a very nascent stage, accounts for 0.5% of the demand Companies planning to enter this market : Priyadarshini Cements in Hyderabad Saurashtra Cements in Navi Mumbai Pioneer a world leader entering the market Capacity additions expected in the next few years ACC plans to treble its capacities, Grasim is setting up four more plants L&T plans to add another eight more

Concerns Cement industry going through a consolidation phase in the last few years

Transportation Transportation costs high - freight accounts for 17% of the production cost Road preferred mode for transportation for distances less than 250kms. However, industry is heavily dependant on roads as the railway infrastructure is not adequate shortage of wagons.

Capacity additions Acquisitions have been the mainstay of the business Regional imbalance resulting in cross regional movement limestone availability in pockets has led to uneven capacity additions Capacity additions have slowed down

Industry inputs Highly capital intensive industry Nearly 55-60% of the inputs controlled by the government Facing problems due to power shortage Coal availability and quality affecting production Mini plants realisation of revenue lower than large plants, survival difficult

Future Demand drivers Infrastructure & construction sector the major demand drivers. Some demand determinants Economic growth Industrial activity Real estate business Construction activity Investments in the core sector

Future Signs of a revival growth in the housing sector central road fund established for national highways and railway over bridges to provide the necessary impetus expansion plans, greenfield projects on the anvil Capacity likely to be 126.9 mn. tonnes by 2000 - 2004 By 2000 - 1.9 mn tonnes addition expected 2000-2001 - 2 mn tonnes 2001 - 2002 - 5 mn tonnes Demand - supply balance expected in the next 12 - 15 months

Higher capacity utilisation likely in the future Encouraging trend in demand due to pick-up in rural housing demand and industrial revival Industry likely to grow at 8-10% in the next few years

Reference : WebSite http://www.indiamarkets.com Back

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