Cement Industry

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

Usage

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

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

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

Plants located close to limestone centres

Resulted in cross regional movement

80% of the production consumed within the states except Madhya Pradesh

Major clusters

Satna, MP (11.77 mntpa)

Chandrapur, Maharashtra/ AP (9.59 mntpa)

Gulbarga, Karnataka/ AP (6.83 mntpa)

Yerranguntla, AP (1.9 mntpa)

Nalgonda, AP (5.85 mntpa)

Bilaspur, MP (9.7 mntpa)

Chandoria, Rajasthan/ MP (7.03 mntpa)

Non cluster (47.60 mntpa)

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

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.

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

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

Infrastructure & construction sector the major demand drivers. Some demand determinants

Signs of a revival
Capacity likely to be 126.9 mn. tonnes by 2000 - 2004
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