Cement is a binding material used in building and engineering.

It begins as a powder that when mixed with water creates a

heavy paste that when allowed to dry forms a very sturdy, rock-
like surface that will hold together structural elements such as
bricks and stone. The cement industry involves the production
of cement powder and its marketing and sales as well as its
usage by cement masons in the construction industry. The type
of cement commonly sold and utilized in the cement industry is
Portland cement.

Significance
1. According to the Portland Cement Association, the cement industry in the United
States produces and ships $8.6 billion worth of cement each year. There are 118
cement plants in the country, and the United States ranks third in cement
production behind China and India. In terms of masonry, the US Bureau of Labor
Statistics reports that over 229,000 individuals are employed by laying cement
and that the industry is expected to grow by 11% over the next two decades,
employing an additional 26,000 new masons.
History
2. Cement itself dates to ancient Greece and Rome where it was formed from
volcanic ash and lime. John Smeaton is credited with a primitive form of Portland
cement that he created in 1756 for use in the construction of a lighthouse in
England. In 1824, Cement in its modern form was patented by Joseph Aspdin.
Aspidin named his invention "Portland Cement" as he believed that when it dried
it resembled a type of limestone quarried in Portland, England, that was known
as Portland Stone. The commercial manufacture of cement began to be
widespread in1850 across Europe and the United States.
Features of Cement Production
3. The cement industry is affected by the general rate of construction in the United
States; however, it is not as greatly influenced by times of economic downturn
because cement is utilized in all phases and types of construction, making it
always in demand in some areas. Sales of cement are seasonal in nature across
much of the country, with peak times being in the spring and summer when the
majority of outdoor construction takes places in the Midwest and Northeast
portions of the United States. The cement industry is also considered to be
regional in nature because it is quite expensive to haul powdered cement in the
large quantities that are typically needed for building projects. This causes
companies utilizing cement to search out the closest source of cement possible
to reduce transportation costs. Though there are only 118 cements plants in the
country, there are several hundred cement suppliers who absorb the cost of
transporting the cement to their facilities. It is then the responsibility of
contractors to pay to have the cement hauled to their work site, either in their own
 vehicles or by the supplier. When contractors search for a cement supplier,
distance is considered as well as the actual price per ton of the cement itself, with
an effort made to buy as close to their location as possible.
Features of Cement Masonry
4. In addition to being involved with general construction, cement masons are
widely employed to work with concrete, which is formed with cement. Cement
masons are responsible for preparing work sites by building framework and
planning the best strategy for pouring the concrete. Masons then continue their
work, mixing the concrete personally by combining cement with other raw
materials or supervising the mixing completed by other laborers. They then
oversee the pouring of the concrete and work to shape and finish the concrete
according to its intended use. Concrete is used in a variety of ways, including
foundations, parking and walking surfaces, and building structures, and no matter
what the purpose of the concrete, cement masons are responsible for the
finished product.
Issues
5. A variety of issues are important to the cement industry. The most important of
these fall into the category of environmental concerns. Cement manufacturers
are responsible for meeting Federal clean air and water standards as well as
informing communities that surround their plants about any potential effects of
the factory's presence to the environment. Cement manufacturers must also be
concerned with energy efficiency in their plants as well as the amount of
greenhouse emissions they release into the atmosphere. Another interest and
issue in the cement industry is the United States' commitment to improved
infrastructure to stimulate the economy, which will place increased demands
upon cement production. Both cement manufacturers and masons must adhere
to standards set by Occupational Safety and Health Administration (OSHA).
Fast rising Government Expenditure on Infrastructure sector in India has resulted a higher demand of cement in
the country. In the same direction, participation of larger companies in the sector has increased.

For raising efficiency in the sector, the Planning Commission of India in the 10th plan has formed a 'Working
Group on Cement Industry
There is a total number of 125 large cement plants and more than 300 small cement plants operating in India
presently.

Cement Industry

Total production KPMG Consultancy Pvt. Ltd. The report submitted

The cement industry comprises of 125 by the organization has made several Indian
large cement plants with an installed recommendations for making the Indian Cement Cement
capacity of 148.28 million tonnes and Industry more competitive in the international Sector
more than 300 mini cement plants with market. The recommendations are under
an estimated capacity of 11.10 million consideration.
tonnes per annum.
Cement industry has been decontrolled from
price and distribution on 1st March 1989 and
The Cement Corporation of India, which de-licensed on 25th July 1991. However, the
is a Central Public Sector Undertaking, performance of the industry and prices of cement
has 10 units. There are 10 large cement are monitored regularly. Being a key
plants owned by various State infrastructure industry, the constraints faced by
Governments. The total installed the industry are reviewed in the Infrastructure
capacity in the country as a whole is Coordination Committee meetings held in the
159.38 million tonnes. Actual cement Cabinet Secretariat under the Chairmanship of
production in 2002-03 was 116.35 Secretary (Coordination). The Committee on
million tonnes as against a production of Infrastructure also reviews its performance.
106.90 million tonnes in 2001-02,
registering a growth rate of 8.84%. Technological change
Major players in cement production
are Ambuja cement, Aditya Cement, Continuous technological upgrading and
J K Cement and L & T cement. assimilation of latest technology has been going
on in the cement industry. Presently 93 per cent
Apart from meeting the entire domestic of the total capacity in the industry is based on
demand, the industry is also exporting modern and environment-friendly dry process
cement and clinker. The export of technology and only 7 per cent of the capacity is
cement during 2001-02 and 2003-04 based on old wet and semi-dry process
was 5.14 million tonnes and 6.92 million technology. There is tremendous scope for waste
tonnes respectively. Export during April- heat recovery in cement plants and thereby
May, 2003 was 1.35 million tonnes. reduction in emission level. One project for co-
Major exporters were Gujarat Ambuja generation of power utilizing waste heat in an
Cements Ltd. and L&T Ltd. Indian cement plant is being implemented with
Japanese assistance under Green Aid Plan. The
The Planning Commission for the induction of advanced technology has helped the
formulation of X Five Year Plan industry immensely to conserve energy and fuel
constituted a 'Working Group on and to save materials substantially.
Cement Industry' for the
development of cement industry. India is also producing different varieties of
The Working Group has identified cement like Ordinary Portland Cement (OPC),
following thrust areas for improving Portland Pozzolana Cement (PPC), Portland Blast
demand for cement; Furnace Slag Cement (PBFS), Oil Well Cement,
Rapid Hardening Portland Cement, Sulphate
i. Further push to housing Resisting Portland Cement, White Cement etc.
development programmes; Production of these varieties of cement conform
ii. Promotion of concrete Highways to the BIS Specifications. Also, some cement
and roads; and plants have set up dedicated jetties for promoting
iii. Use of ready-mix concrete in bulk transportation and export.
large infrastructure projects.
Further, in order to improve global
competitiveness of the Indian Cement
Industry, the Department of Industrial
Policy & Promotion commissioned a
study on the global competitiveness of
the Indian Industry through an
organization of international repute, viz.

Agriculture farming | Agriculture development

| Agriculture report

Sector structure/Market size

India is the world's second largest producer of cement after China, with cement companies adding nearly eight
million tonnes (MT) capacity in April 2009, taking the total installed capacity to 219 MT. A few of the leading
manufacturers are the UltraTech/Grasim combine, Dalmia Cements, India Cements, Holcim etc.
With the boost given by the government to various infrastructure projects, road networks and housing facilities,
growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, Minister
of State, Ministry of Commerce and Industry, cement production could rise to 236.16 MT in FY11 and touch
262.61 MT in FY12.
With almost total capacity utilisation levels in the industry, cement despatches have maintained a 10 per cent
growth rate. Total despatches grew to 170 MT during 2007–08 as against 155 MT in 2006–07.
Moreover, cement despatches were 15.95 MT in July 2009, showing a growth of 9.92 per cent as compared to
14.51 MT in July 2008. During July 2009, cement production was 16.23 MT, registering a growth of 10.63 per
cent as compared to 14.67 MT in July 2008. Between April to July 2009, cement production totaled 66.38 MT
while cement despatches totaled 65.80 MT.
Technological change
Continuous technological upgrading and assimilation of latest technology has been going on in the cement
industry. Presently, 93 per cent of the total capacity in the industry is based on modern and environment-friendly
dry process technology and only 7 per cent of the capacity is based on old wet and semi-dry process technology.
There is tremendous scope for waste heat recovery in cement plants and thereby reduction in emission level.
New Investments
• JSW Cement, part of the OP Jindal Group, plans to set up cement units near the group’s steel plants at
Kurnool, Andhra Pradesh, and Vijayanagar, Karnataka. The units which will have a combined capacity
of 5.5 MT per annum will be set up at a cost of US$ 393.1 million.
• Anil Ambani Group company Reliance Infrastructure will invest US$ 2.1 billion to set up cement plants
with a total capacity of 20 MT per annum over the next five years.
• Reliance Cementation, an Anil Dhirubhai Ambani Group (ADAG) company, plans to set up a 5 MT
integrated cement plant in Yavatmal district of Maharashtra at a cost of US$ 463.2 million.
• Jaiprakash Associates Ltd has inked a MoU with state-owned Assam Mineral Development Corporation
Limited (AMDC) for setting up a 2 MT per annum capacity cement plant at an estimated cost of US$
221.36 million.
• Iron ore mining firm Rungta Mines (RML), the flagship company of SR Rungta group, plans to set up a
one million tonne cement plant in Orissa with an investment of around US$ 123 million.
Mergers and Acquistions (M&As)
• Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22 per cent to
56 per cent through various open market transactions with an open offer for a total investment of US$
1.8 billion. Moreover, it also increased its stake in ACC Cement with US$ 486 million, being the single
largest acquirer in the cement sector.
• Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and Emerging
Market Fund have together bought around 7.5 per cent in India's third-largest cement firm, India
Cements (ICL), for US$ 124.91 million.
• Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim Industries' 53.63 per cent
stake in Shree Digvijay Cement.
• CRH Plc, the world's second biggest maker and distributor of building materials, acquired a 50 per cent
stake in My Home Industries Ltd for almost US$ 372.64 million.
• Vicat SA, a French cement maker acquired a 6.67 per cent stake in Hyderabad-based Sagar Cement
for US$ 14.35 million.
Government Initiatives
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 cement industry.
• Increased infrastructure spending has been a key focus area over the last five years indicating good
times ahead for cement manufacturers.
• The government has increased budgetary allocation for roads under National Highways Development
Project (NHDP).
• Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper
allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.
Keeping in mind the global meltdown which is impacting the cement companies in India, the government re-
imposed the counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to provide
a level playing field to domestic companies.
Road Ahead
According to a report by the ICRA Industry Monitor, the installed capacity is expected to increase to 241 MTPA
by FY 2010-end. India's cement industry is likely to record an annual growth of 10 per cent in the coming years
with higher domestic demand resulting in increased capacity utilisation.
Moreover, according to the Centre for Monitoring Indian Economy (CMIE), cement production is expected to
grow by 8.1 per cent and demand for the same is likely to rise by a healthy 7-7.5 per cent in FY 2009-10.
Exchange rate used:
1 USD = 48.57 INR (as on July 2009)
The cement industry is one of the vital industries for economic development in a country. The total utilization of
cement in a year is used as an indicator of economic growth.

Cement is a necessary constituent of infrastructure development and a key raw material for the construction
industry, especially in the government’s infrastructure development plans in the context of the nation’s
socioeconomic development.

Cement Industry In India

Prior To Independence
The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company endeavored to
manufacture cement from Argillaceous (kankar).

But the first endeavor to manufacture cement in an organized way commenced in Madras. South India Industries
Limited began manufacture of Portland cement in 1904.But the effort did not succeed and the company had to
halt production.

Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India Cement Company Ltd
at Porbandar, Gujarat with an available capacity of 10,000 tons and production of 1000 installed. The First World
War gave the impetus to the cement industry still in its initial stages. The following decade saw tremendous
progress in terms of manufacturing units, installed capacity and production. This phase is also referred to as the
Nascent Stage of Indian Cement Industry.

During the earlier years, production of cement exceeded the demand. Society had a biased opinion against the
cement manufactured in India, which further led to reduction in demand. The government intervened by giving
protection to the Industry and by encouraging cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the twin goals of creating a positive awareness
among the public of the utility of cement and to propagate cement consumption.

After Independence
The growth rate of cement was slow around the period after independence due to various factors like low prices,
slow growth in additional capacity and rising cost. The government intervened several times to boost the industry,
by increasing prices and providing financial incentives. But it had little impact on the industry.

In 1956, the price and distribution control system was set up to ensure fair prices for both the manufacturers and
consumers across the country and to reduce regional imbalances and reach self sufficiency.

Period Of Restriction (1969-1982)

The cement industry in India was severely restrained by the government during this period. Government hold
over the industry was through both direct and indirect means. Government intervened directly by exercising
authority over production, capacity and distribution of cement and it intervened indirectly through price control.

In 1977 the government authorized higher prices for cement manufactured by new units or through capacity
increase in existing units. But still the growth rate was below par.
In 1979 the government introduced a three tier price system. Prices were different for cement produced in low,
medium and high cost plants.

However the price control did not have the desired effect. Rise in input cost, reduced profit margins meant the
manufacturers could not allocate funds for increase in capacity.

Partial Control (1982-1989)

To give impetus to the cement industry, the Government of India introduced a quota system in 1982.A quota of
66.60% was imposed for sales to Government and small real estate developers. For new units and sick units a
lower quota at 50% was effected. The remaining 33.40% was allowed to be sold in the open market.

These changes had a desired effect on the industry. Profitability of the manufacturers increased substantially, but
the rising input cost was a cause for concern.

After Liberalization
In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges of free market
competition due to the impending policy of liberalization. In 1991 the industry was de licensed.

This resulted in an accelerated growth for the industry and availability of state of the art technology for
modernization. Most of the major players invested heavily for capacity expansion.

To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports.
The role of the government has been extremely crucial in the growth of the industry.

Future Trends

• The cement industry is expected to grow steadily in 2009-2010 and increase capacity by another 50
million tons in spite of the recession and decrease in demand from the housing sector.

• The industry experts project the sector to grow by 9 to 10% for the current financial year provided
India's GDP grows at 7%.

• India ranks second in cement production after China.

• The major Indian cement companies are Associated Cement Company Ltd (ACC), Grasim Industries
Ltd, Ambuja Cements Ltd, J.K Cement Ltd and Madras Cement Ltd.

• The major players have all made investments to increase the production capacity in the past few
months, heralding a positive outlook for the industry.

• The housing sector accounts for 50% of the demand for cement and this trend is expected to continue
in the near future.
The Cement industry has continued its growth trajectory over the past seven years. Domestic cement
demand growth has surpassed the economic growth rate of the country for the past couple of years.
Over the past five years (FY03-07), cement demand has grown at a CAGR of 8.37% higher than the
CAGR of supply at 4.84%. Demand for cement in the country is expected to continue its buoyant ride
on the back of robust economic growth and infrastructure development in the country.
The key drivers for cement demand are real estate sector, infrastructure projects and industrial
expansion projects. Among these, real estate sector is the key driver and accounted for almost 55%
of cement demand
in FY 07.
During the period FY 03 – 07, capacity additions in the country (30.6 mn tonnes) were at a slower rate
compared to demand growth leading to higher average capacity utilization rates from 81.3% in FY 03
to
93.8% in FY 07. This exerted pressure on average prices which have increased from Rs. 156 per bag
in FY 03 to Rs. 216 per bag in FY 07. In December 2007, prices stood at Rs. 245 - Rs. 250 per bag.
Low capacity addition coupled with higher utilization rate also led to increase in proportion of blended
cements in product mix. Blended cement accounted for 68% of product mix in FY 07 as compared to
49% in FY 03.
Cement is a bulky commodity and cannot be easily transported over long distances making it a
regional market place, with the nation being divided into five regions. Each region is characterised by
its own
demand-supply dynamics. The Southern region dominated the cement consumption at 44.5 mn
tonnes in FY 07, accounting for about 30% of total domestic cement consumption. During FY 03-07,
Southern region
has witnessed highest CAGR of cement demand at 10.4% followed by Northern and Eastern regions
at 8.9% and 9%, respectively.
Over the past five years, cost of cement production has grown at a CAGR of 8.4%. The producers
have been able to pass on the hike in cost to consumers on the back of increased demand. Average
realizations
have increased from Rs. 1,880 per tonne in FY 03 to Rs. 3,133 per tonne in FY 07, at a CAGR of
13.6%, which has resulted in higher profit margins of the industry.
To reduce the cost of production, the industry is increasing its focus on captive power generation.
Proportion of cement production through captive power route has increased over the years. Also,
cement movement by
rail has increased over the years.
Indian Cement Industry: Break-even Cushion to anchor fall in cement prices …..
The Indian cement industry has witnessed a phenomenal capacity addition to the tune of about 52 mn
tonnes in the last two financial years which accounted for about 24% of the industry’s capacity of 218
mn tonnes at the end of FY09. In the last two financial years, the cement industry has registered a
double-digit growth in capacity addition compared to moderate growth of 3-7% registered during
period FY 03-07. As a result, industry’s capacity utilisation rate which showed a rising trend upto
FY07, has dropped to a level of 83% in FY09.
In FY09, the GDP growth slowed down to 6.7% compared to the 9% growth reported in FY08.
However, cement consumption growth in FY09 at 8.4% has been able to maintain its multiplier factor
with GDP growth at 1.25 times.
In FY09, all the regions except the Western and the Northern region have outperformed the industry
in consumption growth. The Eastern region continued its buoyant performance and registered the
highest cement consumption growth of 11.3% on yoy basis. The Southern and Central regions also
reported impressive double-digit growth of 10.4% in cement consumption. But, the Northern region
has registered the lowest growth in the cement demand on yoy basis. Comparatively, poor demand
growth registered by the Western region was on account of high base of the last year and also slightly
subdued demand.
With focus on capacity addition, many small/medium players have been able to capture more market
share and consolidate their position in the industry in the last two years. Market share of top five
individual companies taken together show a decline to a level of 44.3% in FY09 from 46.3% in FY08.
Eventhough the utilisation rate dropped, average cement prices in FY09 rose by about 5% on yoy
basis. But, the growth in cement prices remained slightly subdued compared to 21% and 14%,
registered in FY07 and FY08, respectively. On the regional front, prices in the Southern region were
firm and ruling consistently at the highest level amongst all the regions in FY09. However, due to
slowdown in the cement offtake and relatively low operating rate, prices in the Northern region
remained at the lowest levels compared to other regions.
In FY09, the cement industry witnessed a fall in profitability. Eventhough, average realisation for the
industry increased by about 4% on yoy basis, cost of production has increased by 18.5% on yoy
basis. Power and fuel cost for many cement companies increased in FY09 mainly on account of
substantial increase in coal prices. As a result, the operating profit margin of the industry dropped by
about 8-9% in FY09. Also, higher interest rates and depreciation provided on expanded capacities
took its toll on the net profit margin of the industry which witnessed a decline by about 5% in FY09.
Going forward, cement companies would be benefited by their focus on captive power generation
which would help them to reduce power & fuel cost. With reduction in coal prices, CARE Research
has estimated that per tonne power & fuel cost of the industry will decline by about 12% in FY10 on
yoy basis.
CARE Research has estimated that break-even cushion (defined as the ratio of overall capacity
utilisation rate of the industry to the utilisation rate at the breakeven point in a particular year) of the
industry has notably increased to 2.4 times in FY09 compared to an average level of 1.1 times in the
period FY 02-05. With comfortable break-even cushion value, the cement industry is in better position
to operate at lower utilisation rate and avoid substantial price cuts. CARE Research does not foresee
a notable drop in average realisation of the industry in FY10.
CARE Research has estimated the domestic cement demand to grow at a CAGR of about 8.8% in the
next two years. Cement demand in the next year would largely be driven by low-cost housing
segment in rural & semi-urban regions and government’s focus on infrastructure development in the
country.
The level of consolidation in the cement industry had slowed down in the last couple of years.
However, one analysis suggests that the Net Present Value (NPV) of a Greenfield plant is still higher
than the NPV of an acquired unit, leading us to the conclusion that further consolidation in the industry
is still away.
The report elucidates facts on the Indian Cement industry, supplemented by the latest statistics. The
report is divided into two sections. Section I mainly covers performance of the industry in the last
financial year and also analysis of past five years’ data. Section II covers information on some
technical aspects about the product and basics of the cement industry alongwith exhaustive database.
Following are the few points with are emphasised to accomplish the report:
Indian Cement Industry: Break-even Cushion to anchor fall in cement prices …..
The Indian cement industry has witnessed a phenomenal capacity addition to the tune of about 52 mn
tonnes in the last two financial years which accounted for about 24% of the industry’s capacity of 218
mn tonnes at the end of FY09. In the last two financial years, the cement industry has registered a
double-digit growth in capacity addition compared to moderate growth of 3-7% registered during
period FY 03-07. As a result, industry’s capacity utilisation rate which showed a rising trend upto
FY07, has dropped to a level of 83% in FY09.
In FY09, the GDP growth slowed down to 6.7% compared to the 9% growth reported in FY08.
However, cement consumption growth in FY09 at 8.4% has been able to maintain its multiplier factor
with GDP growth at 1.25 times.
In FY09, all the regions except the Western and the Northern region have outperformed the industry
in consumption growth. The Eastern region continued its buoyant performance and registered the
highest cement consumption growth of 11.3% on yoy basis. The Southern and Central regions also
reported impressive double-digit growth of 10.4% in cement consumption. But, the Northern region
has registered the lowest growth in the cement demand on yoy basis. Comparatively, poor demand
growth registered by the Western region was on account of high base of the last year and also slightly
subdued demand.
With focus on capacity addition, many small/medium players have been able to capture more market
share and consolidate their position in the industry in the last two years. Market share of top five
individual companies taken together show a decline to a level of 44.3% in FY09 from 46.3% in FY08.
Eventhough the utilisation rate dropped, average cement prices in FY09 rose by about 5% on yoy
basis. But, the growth in cement prices remained slightly subdued compared to 21% and 14%,
registered in FY07 and FY08, respectively. On the regional front, prices in the Southern region were
firm and ruling consistently at the highest level amongst all the regions in FY09. However, due to
slowdown in the cement offtake and relatively low operating rate, prices in the Northern region
remained at the lowest levels compared to other regions.
In FY09, the cement industry witnessed a fall in profitability. Eventhough, average realisation for the
industry increased by about 4% on yoy basis, cost of production has increased by 18.5% on yoy
basis. Power and fuel cost for many cement companies increased in FY09 mainly on account of
substantial increase in coal prices. As a result, the operating profit margin of the industry dropped by
about 8-9% in FY09. Also, higher interest rates and depreciation provided on expanded capacities
took its toll on the net profit margin of the industry which witnessed a decline by about 5% in FY09.
Going forward, cement companies would be benefited by their focus on captive power generation
which would help them to reduce power & fuel cost. With reduction in coal prices, CARE Research
has estimated that per tonne power & fuel cost of the industry will decline by about 12% in FY10 on
yoy basis.
CARE Research has estimated that break-even cushion (defined as the ratio of overall capacity
utilisation rate of the industry to the utilisation rate at the breakeven point in a particular year) of the
industry has notably increased to 2.4 times in FY09 compared to an average level of 1.1 times in the
period FY 02-05. With comfortable break-even cushion value, the cement industry is in better position
to operate at lower utilisation rate and avoid substantial price cuts. CARE Research does not foresee
a notable drop in average realisation of the industry in FY10.
CARE Research has estimated the domestic cement demand to grow at a CAGR of about 8.8% in the
next two years. Cement demand in the next year would largely be driven by low-cost housing
segment in rural & semi-urban regions and government’s focus on infrastructure development in the
country.
The level of consolidation in the cement industry had slowed down in the last couple of years.
However, one analysis suggests that the Net Present Value (NPV) of a Greenfield plant is still higher
than the NPV of an acquired unit, leading us to the conclusion that further consolidation in the industry
is still away.
The report elucidates facts on the Indian Cement industry, supplemented by the latest statistics. The
report is divided into two sections. Section I mainly covers performance of the industry in the last
financial year and also analysis of past five years’ data. Section II covers information on some
technical aspects about the product and basics of the cement industry alongwith exhaustive database.
Following are the few points with are emphasised to accomplish the report:
Section I

Indian Cement Industry: Break-even Cushion to anchor fall in cement prices …..
The Indian cement industry has witnessed a phenomenal capacity addition to the tune of about 52 mn
tonnes in the last two financial years which accounted for about 24% of the industry’s capacity of 218
mn tonnes at the end of FY09. In the last two financial years, the cement industry has registered a
double-digit growth in capacity addition compared to moderate growth of 3-7% registered during
period FY 03-07. As a result, industry’s capacity utilisation rate which showed a rising trend upto
FY07, has dropped to a level of 83% in FY09.
In FY09, the GDP growth slowed down to 6.7% compared to the 9% growth reported in FY08.
However, cement consumption growth in FY09 at 8.4% has been able to maintain its multiplier factor
with GDP growth at 1.25 times.
In FY09, all the regions except the Western and the Northern region have outperformed the industry
in consumption growth. The Eastern region continued its buoyant performance and registered the
highest cement consumption growth of 11.3% on yoy basis. The Southern and Central regions also
reported impressive double-digit growth of 10.4% in cement consumption. But, the Northern region
has registered the lowest growth in the cement demand on yoy basis. Comparatively, poor demand
growth registered by the Western region was on account of high base of the last year and also slightly
subdued demand.
With focus on capacity addition, many small/medium players have been able to capture more market
share and consolidate their position in the industry in the last two years. Market share of top five
individual companies taken together show a decline to a level of 44.3% in FY09 from 46.3% in FY08.
Eventhough the utilisation rate dropped, average cement prices in FY09 rose by about 5% on yoy
basis. But, the growth in cement prices remained slightly subdued compared to 21% and 14%,
registered in FY07 and FY08, respectively. On the regional front, prices in the Southern region were
firm and ruling consistently at the highest level amongst all the regions in FY09. However, due to
slowdown in the cement offtake and relatively low operating rate, prices in the Northern region
remained at the lowest levels compared to other regions.
In FY09, the cement industry witnessed a fall in profitability. Eventhough, average realisation for the
industry increased by about 4% on yoy basis, cost of production has increased by 18.5% on yoy
basis. Power and fuel cost for many cement companies increased in FY09 mainly on account of
substantial increase in coal prices. As a result, the operating profit margin of the industry dropped by
about 8-9% in FY09. Also, higher interest rates and depreciation provided on expanded capacities
took its toll on the net profit margin of the industry which witnessed a decline by about 5% in FY09.
Going forward, cement companies would be benefited by their focus on captive power generation
which would help them to reduce power & fuel cost. With reduction in coal prices, CARE Research
has estimated that per tonne power & fuel cost of the industry will decline by about 12% in FY10 on
yoy basis.
CARE Research has estimated that break-even cushion (defined as the ratio of overall capacity
utilisation rate of the industry to the utilisation rate at the breakeven point in a particular year) of the
industry has notably increased to 2.4 times in FY09 compared to an average level of 1.1 times in the
period FY 02-05. With comfortable break-even cushion value, the cement industry is in better position
to operate at lower utilisation rate and avoid substantial price cuts. CARE Research does not foresee
a notable drop in average realisation of the industry in FY10.
CARE Research has estimated the domestic cement demand to grow at a CAGR of about 8.8% in the
next two years. Cement demand in the next year would largely be driven by low-cost housing
segment in rural & semi-urban regions and government’s focus on infrastructure development in the
country.
The level of consolidation in the cement industry had slowed down in the last couple of years.
However, one analysis suggests that the Net Present Value (NPV) of a Greenfield plant is still higher
than the NPV of an acquired unit, leading us to the conclusion that further consolidation in the industry
is still away.
The report elucidates facts on the Indian Cement industry, supplemented by the latest statistics. The
report is divided into two sections. Section I mainly covers performance of the industry in the last
financial year and also analysis of past five years’ data. Section II covers information on some
technical aspects about the product and basics of the cement industry alongwith exhaustive database.
Following are the few points with are emphasised to accomplish the report:
Asia / Oceania
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Globalization of Indian Cement Industry

Nov, 13 2009
<Quarry plan gets the green light | Lafarge-Shui On in $600 mln spinoff...>
(India) -- Globalization of Indian cement industry has helped the industry to restructure itself to cooperate with
the changes in 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 inception in the British Raj in India. Although most of
the players in the Indian cement industry were private organizations, industry was highly regulated.

With the rapid growth of the Indian economy after the 1990s, the infrastructural development of the country was
fantastic. The increase in construction activities has led to increase in demand for updated quality building
materials and other related products. Cement is one of the main elements of the building; there is a growth in the
cement industry in India. Consumption of cement in India has increased by nearly 7.5%. With the globalization of
the Indian cement industry many foreign cement producers to engage in contracts and deals with their Indian
counter parts to get a share of growth.

Globalization of Indian cement industry comprises more foreign companies entering into mergers and
acquisitions of Indian cement companies. For example,

Heidelberg Cement - Indorama Cement Heidelberg Cement Company signed an agreement on a 50% joint
venture with the Indorama Cement Ltd., located in Mumbai, which was originally occupied by the Indorama SP
Lohia Group. Heidelberg Cement Company is the leading German cement company. Heidelberg Cement was
established in 1873 and has a long and prosperous history. Is one of the best in the world to Heidelberg Cement
Company has its bases in different countries. Heidelberg Cement Company has two production units in India. A
grinding plant in Mumbai and a cement terminal near Mumbai port. A clinker plant comes up in the State of
Gujarat.

Holcim Cement - Gujarat Ambuja Cement (GACL), Holcim Cement signed an agreement to acquire 14.8% of
Gujarat Ambuja Cement (GACL). With new products, skilled personnel superb leadership, and an excellent
marketing strategy, this tie good lead over other competitors. Holcim Cement Company are among the leading
cement manufacturing and supplying companies in the world. It is one of the largest employers in the world which
has a workforce of 90,000. The Holcim Cement Company has units in over 70 countries worldwide.

Italcementi cement - Zuari Cement Limited Italcementi Cement Company with help from Francois Ciments, a
subsidiary for its global operations, has acquired shares in the famous Indian cement - Zuari Cement Limited.
The purchase was at 50% of the shares and the deal was for around 100 million Euros. Italcementi Cement is the
5th largest cement manufacturing company in the world. Production capacity in Italcementi Cement Company
has around 70 million tonnes a year. With the construction boom in India, the company looks for a stable future.
In 2001 Italcementi cement into the Indian market scenario. It took over the factory in Zuari Cement Limited in
Andhra Pradesh in southern India. The joint venture earned around 100 million Euros and an operating profit of 4
million Euros.

Lafarge India is a subsidiary of Lafarge Cement Company in France. It was established in 1999 in India with the
acquisition of Tisco and Raymond cement factories. Lafarge Cement currently has three cement production units
in India. One of them is in Jharkhand, which is used for grinding and the other two are in Chhattisgarh, which is
used for manufacturing. The Lafarge Cement Company was established in year 1833 by Leon Pavin. Lafarge
Cement Company is located in France is the leading cement company in the world. It has plans to increase
cement production through technological innovation and maximizing the capacity of the plant. It has a large
network of distributors in the eastern part of India. The Lafarge Cement Company is currently producing nearly
5.5 million tonnes of cement in the Indian cement market.
The Indian cement industry
Intro:

The Indian cement industry has seen an upward trend despite the global economic slowdown
and plans to add around 85-90 million tones of capacity over next two years.

The Indian cement industry has witnessed a strong FY 2009 (Apr-Mar), with the cement
manufacturers’ posting robust dispatch growth of 8.1 percent year-on-year (y-o-y). This was
largely aided by the surge in demand since November 2008 due to the pre-election spending on
infrastructure and rural projects.

According to provisional numbers released by Cement Manufacturers Association of India,

cement consumption was also at its peak during FY 2009 registering 8.6 percent y-o-y growth,
which also exceeded the 8 percent growth expectation of industry analysts.

Among major regions, the northern region reported the highest growth of 19.6 percent

y-o-y led by incremental demand from major projects, namely, Commonwealth Games,
sewerage line project in Punjab, national irrigation project in Haryana, Delhi Metro, flyover and
Delhi airport. The re-imposition of Counter Veiling Duty (CVD) and special CVD on imported
cement has also contributed to growth from northern players.

On the other hand, the southern region has reported growth of 12.8 percent y-o-y driven by
higher demand from irrigation projects. The eastern region has reported growth of 8.8 percent
while the western region has reported 11.2 percent growth in dispatches. The central region’s
dispatches have reported growth of 10.5 percent y-o-y due to spending by the UP government
on low-cost housing.

However, all India consumption growth of 8.6 percent in FY 2009 (Apr-Mar) was lower compared
to the consumption growth of around 10 percent in the last three years.

Among major players, Shree Cement, Jaiprakash Associates, Dalmia Cement and Grasim have
reported impressive growth of 28.4 percent, 28 percent, 23.7 percent and 21.3 percent year-on
year, respectively. Madras Cement and UltraTech Cement have also reported good growth that
is higher than the industry average. The strong growth in the dispatches of these players was
primarily on account of capacity additions. Birla Corp has reported negative growth of 7.9 percent
in dispatches.

Analysts’ feel that the recent uptrend in demand for cement is short term in nature; as the
relatively weaker macro-economic scenario would exert pressure on the demand drivers for
cement.

Oversupply to cut into pricing power

Cement Manufacturers Association, in its provisional numbers, mentioned that with the addition
of around 13.5 million tonnes capacity, India’s total cement capacity will stand at 212 million
tones at the end of FY2009. This capacity addition seems to be modest, however, it is to be
noted that 75 percent (22 million tonnes) of capacity addition in FY 2009 should have been much
more than the provisional numbers of CMA.

The Indian cement industry is planning to add around 85-90 million tones of capacity over next
two years. An analyst from domestic brokerage firm said, “We assume that even if 20 percent of
the planned capacities fail to materialize, still fairly large capacities (70 million tones) would be
added in next two years.” This additional capacity will create an over-supply kind of situation in
the market and will eventually put pressure on cement prices in the coming years.

Another factor to influence the cement prices is the monsoon season, which is just around the
corner. During monsoon season (July-September), cement dispatches usually slowdown due to
decrease in construction activities. This will result in softening of cement prices. Meanwhile,
some of the cement manufacturers are reluctant to bow down due to oversupply situation.

ACC Ltd, the largest cement producers in India, has recently said that the company will remain
firm on its prices. Another domestic player who has a strong hold in North region confirmed that
they will follow the other cement majors in the country with respect to cement prices.

Keeping in mind the above-mentioned factors, analysts expect cement prices to fall by Rs 10-
13/bag (to Rs 232-234) in this monsoon season and may continue to decline further to levels of
Rs 220 by March 2010.

Since last three months, the average cement prices have been moving up. During the period
Jan-Mar 2009, the cement manufacturers hiked cement prices several time taking the average
cement prices to Rs 265 per 50 kg bag from Rs 237-245 per 50 kg bag.

Cement utilization to peak

Cement capacity utilization in India have registered an uptrend in the last five years due to strong
growth in consumption. However, capacity addition during the period lagged the incremental
demand in the country. The FY 2003-08 period witnessed cement capacity addition of 36.7
million tones as against the incremental demand of 56.4 million tones. This has resulted in the
industry’s capacity utilization level increasing to 95.8 percent in FY 2008 from 80 percent in FY
2003.

However in FY 2009, cement capacity utilization declined to 86 percent from 96 percent in the
previous year. Analysts have estimated that the utilization levels will further decline to 80 percent
in FY 2010 due to addition of huge capacities and slowdown in demand. On month-on-month
basis, the capacity utilization peaked in March 2008 at 104 percent and started declining
thereafter. Capacity utilization declined from 104 percent in March 2008 to around 87 percent
during December 2008; however it bounced back in the positive terrain to 96 percent in March
2009, due to recovery in cement demand.
Declining coal prices to support margins

The import prices of coal, a key input for cement, declined to US $180 per tonne during July
2008 from US $80 per tonne in August 2007. The prices, however, corrected by 65 percent since
then and are currently hovering in the range of US $60-65 per tonne.

The cement manufacturer’s uses coal not only to generate power, but it is also a key input in
cement production. Hence, the more-than-doubling of coal prices in the last couple of year had
resulted in a substantial increase in the manufacturing cost of cement to Rs 400 per tonne (Rs 20
per bag). “But, with the 65 percent decline in the imported cost of coal from the peak has resulted
in significant savings for the cement manufacturers,” said a senior analyst from Angel Broking.

The Indian cement industry is number two in the world behind China and has left behind
developed markets such as the US and Japan. With just a meagre per capita consumption of 28 kg
in the 1980’s, now it has risen to 110 kg in the 2000’s. This sounds like an impressive growth but
in terms of per capita consumption, India is still well behind the global average and this process of
catching up with international averages will drive future growth in the Indian cement industry.

With huge investments planned in the Indian Infrastructure both by government and private
sector, booming housing construction and expansion in corporate production facilities is likely to
fast forward the growth in the Indian cement industry. For cement companies based in India,
South-East Asia and the Middle East there are potential and lucrative export markets. Low cost
technology and extensive restructuring have made some of the Indian cement companies the most
efficient across global majors. Despite some consolidation, the industry remains somewhat
fragmented and merger and acquisition possibilities are strong.

Investment norms including guidelines for foreign direct investment (FDI) are investor-friendly. All
these factors present a strong case for investing in the Indian market.
This report on the Indian Cement Industry covers all the important aspects of the Indian Cement
Industry with valuable information and data to help the busy managers and investors to arrive at
an informed decision.

Please Note: this report is updated at the time of purchase so please allow 2 working days for
delivery.