indian+cement+industry

8/7/2019 Indian+Cement+Industry

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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 1000tonnes

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 kgs4. Cement grade limestone in the country reported to be 89 bt. A large proportion however isunexploitable.5. 55 - 60% of the cost of production are government controlled6. Cement sales primarily through a distribution channel. Bulk sales account for < 1% of the totalcement 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 plantsy Companies : 59y Plants : 116y Typical installed capacityy per plant : Above 1.5 mntpay Total installed capacity : 105 mntpay Production 98-99 : 81.6 mntpay Excise :Rs. 350/ tonne

y All India reach through multiple plantsy Export to Bangladesh, Nepal, Sri Lanka,

UAE andy Mauritiusy Strong marketing network, tie-ups with

customers,y contractorsy Wide spread distribution network .y Sales primarily through the dealer channel

Mini cement plantsy Nearly 300 plantsy Located in Gujarat, Rajasthan, MPy Typical capacity < 200 tpdy Installed capacity around 9 mn. Tonnesy Production around : 6.2 mn tonnesy Excise : Rs. 200/ tonne

y Mini plants were meant to tap scatteredlimestone reserves.

However most set up in APy Most use vertical kiln technologyy Production cost / tonne - Rs. 1,000 to 1,400y Presence of these plants limited to the statey Infrastructural facilities not the best

Usage

Private housing sector is the major consumer of cement (65%) followed by the governmentinfrastructure sector at 15% 9down from 20%) < 1% of the cement produced is sold in bulk form unlikeUS & Japan

Production


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y Excess capacity exists, though some units are sicky 99 - 2000 production expected to reach 95 mn

tonnes ]y Exports around 2 mn tonnesy Cement manufactured through the wet, semi-dry or

dry process.y Dry process accounts for 90% of the installedcapacityy Wet process popular in the past - better control over

mixing of raw materialy Dry process replacing wet process as it is space

saving energy efficient and economical

Prices

y Price fluctuations highy

Essentially determined by demand

y Prices also vary with grades

Players

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

Regional

y Plants located close to limestone centresy Resulted in cross regional movementy 80% of the production consumed within the states exceptMadhya Pradesh

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


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y Gulbarga, Karnataka/ AP (6.83mntpa)y Yerranguntla, AP (1.9 mntpa)y Nalgonda, AP (5.85 mntpa)y Bilaspur, MP (9.7 mntpa)y Chandoria, Rajasthan/ MP (7.03mntpa)y Non cluster (47.60 mntpa)

Ready Mix Concrete : Industry

y RMC - ready to use concrete, a blend of cement, sand and aggregate and water mixed inconvenient proportion

y Launched first in Mumbai a few years ago is gaining ground in other metros in Indiay 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.y Currently RMC is at a very nascent stage, accounts for 0.5% of the demand

Companies planning to enter this market :y Priyadarshini Cements in

Hyderabady Saurashtra Cements in Navi

Mumbaiy Pioneer a world leader entering

the markety Capacity additions expected in the

next few yearsy ACC plans to treble i ts capacities,y Grasim is setting up four more

plantsy L&T plans to add another eight

more

Concerns

y Cement industry going through a consolidation phase in the last few yearsTransportation

y Transportation costs high - freight accounts for 17% of the production costy 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

y Acquisitions have been the mainstay of the business


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y Regional imbalance resulting in cross regional movement -limestone availability in pockets has led to uneven capacity additions

y Capacity additions have slowed downIndustry inputs

y Highly capital intensive industryy Nearly 55-60% of the inputs controlled by the governmenty Facing problems due to power shortagey Coal availability and quality affecting productiony Mini plants realisation of revenue lower than large plants, survival difficult

Future

Demand drivers

y 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

y 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

y 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

y Demand - supply balance expected in the next 12 - 15 monthsy Higher capacity utilisation likely in the futurey Encouraging trend in demand due to pick-up in rural housing demand and industrial revivaly Industry likely to grow at 8-10% in the next few years


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Cement Industry - India

Overview

1. Indian cement industry dates back to 1914 - first unit was set-upat Porbandar with a capacity of 1000 tonnes2. Currently India is ranked second in the world with an installedcapacity 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 standardof 256 kgs4. Cement grade limestone in the country reported to be 89 bt. A largeproportion however is unexploitable.5. 55 - 60% of the cost of production are government controlled6. Cement sales primarily through a distribution channel. Bulk salesaccount 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 tonnesMajor 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 scatteredlimestone 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


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Infrastructural facilities not the bestUsage

Private housing sector is the major consumer of cement (65%) followedby the government infrastructure sector at 15% 9down from 20%) < 1% ofthe 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 rawmaterial Dry process replacing wet process as it is space saving energyefficient and economical

Prices Price fluctuations high

Essentially determined by demand Prices also vary with gradesPlayers

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 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)Ready Mix Concrete : Industry RMC - ready to use concrete, a blend of cement, sand and aggregateand water mixed in convenient proportion Launched first in Mumbai a few years ago is gaining ground in othermetros in India Typical cost of a plant - Rs. 7-8 crs (US $ 1.6 to 1.8 mn) to set upa 100 cubic metre (cu m)plantwith 4-5 transit mixers. Gestation period is around 3-4 months. Currently RMC is at a very nascent stage, accounts for 0.5% of thedemand

Companies planning to enter this market : Priyadarshini Cements in Hyderabad Saurashtra Cements in Navi Mumbai Pioneer a world leader entering the market


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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 fewyearsTransportation Transportation costs high - freight accounts for 17% of theproduction cost Road preferred mode for transportation for distances less than250kms.However, industry is heavily dependant on roads as the railwayinfrastructure 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 capacityadditions Capacity additions have slowed downIndustry 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, survivaldifficult

FutureDemand drivers Infrastructure & construction sector the major demand drivers. Somedemand determinants

Economic growthiIndustrial activityiReal estate businessii Construction activityInvestments in the core sectori

Future Signs of a revival

growth in the housing sectoricentrali road fund established for national highways and

railway over bridges to provide the necessary impetusexpansion plans, greenfield projects oni the anvil

Capacity likely to be 126.9 mn. tonnes by 2000 - 2004

i

By 2000 - 1.9 mn tonnes addition expected2000-2001 - 2 mn tonnesi2001 - 2002 - 5 mn tonnesi

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 demandand industrial revival Industry likely to grow at 8-10% in the next few years


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