Cement Industry

Overview

With a production capacity of nearly 390 million tonnes in 2015, India is the second largest producer of cement in the world. Some of the biggest names in the cement industry include the Aditya Birla Group, JK Cements, ACC cement and Ambuja Cement. As of 2015, there has been an underutilization of total capacity in the industry, with total production in 2015 at just 270 million tonnes. Also, ever since 2008, production has always exceeded supply which has resulted in the gradual decrease in prices across the country. The biggest driver of the cement industry is the real estate sector which contributes to over 70% of the total revenue of the sector, while the rest is contributed by the infrastructure sector.

 

Industry Segmentation (Based on Size)

Global and Domestic Outlook

Large cement plants contribute to over 80% of total cement produced and have an installed capacity of 378 million tonnes. The outlook for the cement industry in India is largely positive and has tremendous potential. Besides being the 2nd largest producer of cement in the world, India is also the 2nd largest consumer of cement in the world.

Table 1

 

 

 

The consumption of cement in India is set to grow at a CAGR of 9.7%. As per the 12th five year plan, cement production is expected to reach 407 million tonnes by 2017 which is an indicator of the fast pace at which this industry will grow. Demand is largely expected to come from Tier II and Tier III cities, where development is currently in full swing.

 

As stated before, real estate is the biggest driver of the industry and therefore, with the increase in the demand for homes in the coming future, demand for cement is set to rise to an all time high. Also, the availability of fly-ash (from thermal power plants) and use of advance technology has increased production of blended cement. The country’s per capita consumption is around 190 kg as of 2015, compared to the world average of over 350 kg per capita, which shows great potential for growth. Also, cement production is expected to reach over 80% of production capacity in 2018.

 

Andhra Pradesh is the leading state with 40 large cement plants, followed by Tamil Nadu and Rajasthan having 21 and 20 plants, respectively Major cement clusters include - Satna (Madhya Pradesh), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh), Nalgonda (Andhra Pradesh) and Chandoria (Rajasthan).

Future Potential

The future potential of the industry can be assessed by taking in to consideration the business activities of the leading companies in the sector and also by taking into account policies of the government.

 

Ambuja Cements is targeting an investment of USD580 million for capacity expansion in Rajasthan, Madhya Pradesh and Uttar Pradesh. The proposed project in Rajasthan is expected to add 5 million tonnes (MT) to Ambuja Cements’ existing production capacity of 28.5 mtpa. ACC will upgrade and expand its Jamul unit in Chattisgarh and its grinding unit in Jharkhand. This will increase ACC’s capacity to 38 million tonnes per annum (mtpa) from 30 mtpa in a phased manner by 2016 and 55 million tonnes per annum (MTPA) in 2020.

 

Besides this, capacity utilization is expected to increase and so is per capita consumption of cement. Several international players and investors have also taken active interest in the sector thereby highlighting the latent potential in the sector. Heidelberg Cement, a Germany-based cement manufacturer has commissioned Phase-I of its Jhansi grinding unit. The company has undertaken an investment worth USD259.4 million for expanding its capacity to 2.9 million tonnes (MT). It also aims to ramp up the operational capacity to 6 MT at its Damoh plant in Madhya Pradesh, striving to add an additional 9 MT by 2017. France-based, Vicat Group plans to invest USD600 million for 5.5 MT capacity by FY19. It is negotiating an acquisition of uncontrolled 47 per cent stake in the joint venture Vicat Sagar Cement (Chattrasal, Karnataka) for an enterprise value of about USD680 million. The joint venture Vicat Sagar has 2.8 MT capacity as of 2015.

 

Government initiatives such as ‘Housing For all’ and the boost given to infrastructure in the 2016 finance bill are other important developments in the sectors. These policies will help prop up demand in this industry.

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2021, predicting the growth and movement patterns for 2016 - 2021

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants analysis and their key strategic initiatives

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models and Valuations of major players of the market

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