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The cement industry is one of the main beneficiaries of the infrastructure boom.

With robust demand


andadequate supply, the industry has bright future. The Indian Cement Industry with total capacity 151.2
million tones is the second largest after China. Cement industry is dominated by 20 companies who
account for over 70% of the market. Individually no company accounts for over 12% of the market. The
major players like L&T and ACC have been quiet successful in narrowing the gap between demand and
supply.

Private housing sector is the major consumer of cement (65%) followed by the government infrastructure
sector. Similarly northern and southern region consume around 20%-30% cement while the central and
western region are consuming only 18%-16%.

The company continues to emphasize on cost cutting through enhanced

productivity, reduction in energy costs and logistics expenses. The cement sector

is expected to witness growth in line with the economic growth because of the strong co-relation with
GDP. Future drivers of cement demand growth in India would be the road and housing projects. As per
the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is
likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the
end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with
capacity utilization of 90 per cent.

In brief we have covered Cement market including market size, composition, and market growth, latest
Trends & Opportunities, different policies adopted by the government for the Indian cement industry,
cement production and capacity utilization as well as the current scenario of demand and supply.

CEMENT INDUSTRY
Literature review
India is the 2nd largest cement producer in world after china .Right from laying concrete bricks of
economy to waving fly over’s cement industry has shown and shows a great future. The overall outlook
for the industry shows significant growth on the back of robust demand from housing construction, Phase-
II of NHDP (National Highway Development Project) and other infrastructure development projects.
Domestic demand for cement has been increasing at a fast pace in India. Cement consumption in India is
forecasted to grow by over 22% by 2009-10 from 2007-08.Among the states, Maharashtra has the
highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh
is leading with 14.72% of total production followed by Rajasthan. Cement production grew at the rate of
9.1 per cent during 2006-07 over the previous fiscal's total production of 147.8 mt(million tons). Due to
rising demand of cement the sales volume of cement companies are also increasing & companies
reporting higher production, higher sales and higher profits. The net profit growth rate of cement firms
was 85%. Cement industry has contributed around 8% to the economic development of India. Outsiders
(foreign players) eyeing India as a major market to invest in the form of either merger or FDI (Foreign
Direct Investment). Cement industry has a long way to go as Indian economy is poised to grow because
of being on verge of development.

Despite the growth of Indian cement industry India lags behind the per capita production. Supply
for cement is expected to remain tight which, in turn, will push up prices of cement by more than 50%.
The most important factor for better prices is consolidation of the industry. It has just begun and we will
see more consolidation in the coming years. Other budget measures such as cut in import duty from 12.5
per cent to nil etc. are all intended to cut costs and boost availability of cement.

Sadly the adverse effects of global slowdown have not speared this industry too. Demand is
sluggish, the government is keeping an eagle eye on prizes, domestic coal and pet coke, prizes have
increased sharply and utilizations rates are down. The numbers coming out are a reflection of grim times.
ACC the country’s largest cement company that’s controlled by Swiss giant HOLCIM, registered 2% fall in
august sales. The biggest fall since Feb. 2007. Production fell by 5%.

To stand against the problematic situation, government as well as cement

industry has taken some steps. Companies are focusing on cost of transportation.

One of the strategy is to decrease dependence on road & opt for sea logistics as that can cut
transportation cost by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power
plant, moving closer to the customers by creating clicker, crushing, and capacity in key markets, to be
more customer centric to generate better revenue. India should push for stricter regulations of market
place as to control the prices of big companies and prevent them from forming cartels and exchanging
information. To fight with the high inflation, government wants to import more cement from Pakistan
.However cement prizes are not very much high as other items but still they are increasing. And the
reason of high prize is surging cost of raw material and transportation cost. Apart from this government
also discussed with cement industry not to have increase in prizes and keep consumer interest in mind.

Now the question arise in front of the government is whether the demand by the government is
possible to increase through expenditure on infrastructure or not according to the current state of
economy when so many crises are going on or how the government allocation of US$ 3.23 billion for the
National Highway Development, Project will keep the demand for cement alive?

And to what extent the prizes of cement should be increase so that consumer can’t get
affected.

OBJECTIVES

To study Cement market including market size and composition,

market growth.

To analyze latest Trends & Opportunities.


To Study policies of government related to Cement industry.


To analyze the Cement production and capacity utilization.


To trace out current scenario of demand & supply.

METHODOLOGY
The research is based on the information collected from various types of secondary resources. The
method adopted for these findings is secondary method as there was limitation in collecting primary data
about the cement industry. The main aim is to focus on demand , supply , major players and trends of the
cement industry.

The following sources have been taken for the preparation of this research:

Internet reports

Books

Journals

INTRODUCTION
he cement industry is experiencing a boom on account of the overall growth of the
Indian economy. The demand for cement, being a derived demand, depends primarily on

the industrial activity, real estate business, construction activity, and investment in the
infrastructure sector. India is experiencing growth on all these fronts and hence the cement market is
flourishing like never before. Indian cement industry is globally competitive because the industry has
witnessed healthy trends such as cost control and continuous technology up gradation. Global rating
agency, Fitch Ratings, has commented that cement demand in India is expected to grow at 10% annually
in the medium term buoyed by housing, infrastructure and corporate capital expenditures.

The constraints faced by the industry are reviewed in the Infrastructure Coordination
Committee meetings held in the Cabinet Secretariat under the Chairmanship of Secretary
(Coordination). Its performance is also reviewed by the Cabinet Committee on Infrastructure.
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.

After having gone through a period of over-supply and the phase of massive capacity additions
(latter half of the previous decade), the industry is currently in a consolidation phase, with capacity
additions coming up to cater to the increasing demand. Demand has been driven by a booming housing
sector and increased activity in infrastructure development such as state and national highways. While
the demand is growing at a robust pace of 8% to 10% annually, the paucity of major capacity additions is
putting upward pressure on the cement prices. The top four companies account for almost 40% of the
total domestic capacity, while the remaining is distributed among the large and mini plants in the industry.

CURRENT SCENARIO

The Indian cement industry is the second largest producer of quality cement, which meets global
standards. The cement industry comprises 130 large cement plants and more than 300 mini cement
plants. The industry's capacity at the end of the year reached 188.97 million tons which was 166.73
million tons at the end of the year 2006-07. Cement production during April to March 2007-08 was 168.31
million tons as compared to 155.66 million tons during the same period for the year 2006-07.Despatches
were 167.67 million tons during April to March 2007- 08 whereas 155.26 during the same period. During
April-March 2007-08, cement export was 3.65 million tons as compared to 5.89 during the same period.

T
MAJOR PLAYERS
Company
Installed Capacity

Production

ACC

18,640

17,902

Gujarat Ambuja

14,860

15,094

Ultratech

17,000

13,707

Grasim

14,115

14,649

India Cements

8,810

8,434

JK Group

6,680

6,174

Jaypee Group

6,531

6,316

Century Textiles

6,300

6,636

Madras Cements

5,470

4,550

Birla Corp.
5,113

5,150

Lafarge

5,000

4,573

With an installed capacity of around 157 million tons per annum (mtpa) at end-March 2006, large
cement plants accounted for 93% of the total installed capacity in India. The installed capacity is
distributed over across approximately 129 large cement plants owned by around 54 companies.
The structure of the industry is fragmented, although, the concentration at the top is increasing.
The fragmented structure is a result of the low entry barriers in the post decontrol period and the
ready availability of technology. However, cement plants are capital intensive and require a
capital investment of over Rs. 3,500 per tonne of cement, which translates into an investment of
Rs. 3,500 million for a 1 mtpa plant.

PRODUCTION
The official data released by the Cement Manufacturers Association that showed that the

monthly production in January-June this year is higher than the previous year.

PRODUCTI ON FI GURES

2006

2007

January

13.07

14.05

February

12.26

13.00

March

14.15

14.95

April

13.23

13.97

May
12.99

14.26

June

12.91

13.66*

Figures in million tonne

* Provisional figures

Source: Cement Manufacturers’ Association

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Cement Industry

Pakistan's cement sector presently is one of those sectors that have managed to thrive in adverse
conditions being faced by business across the board in 2008-09. The country at present has 29 cement
plants with an installed capacity of producing around 39 million tones of cement mainly Pak-land cement.
The cement sector posted a growth rate of 4.71 percent during July-March 2008-09. Pakistan is not only
meeting its domestic needs but also exporting the surplus. Salient features of production and
consumption are in Table:-

Pakistan Cement Industry produces exportable surplus of cement which is exported mainly to
Afghanistan, India, Africa and the Middle East. The average capacity utilization, production and export of
cement in the past three years have been given in box.

S. No. Year Export Value


Million Tones

1. 2006-07 3.2 185 million


2. 2007-08 7.7 450 million
3. 2008-09 8.9 534 million

(up to Apr-09)

Source: Ministry of Industries and Production

Presently, export of cement is exempted from the Sales Tax and Federal Excise Duty (FED). However,
the domestic consumption is being charged 16% Sales Tax and Federal Excise Duty (Rs.900 per ton).
The import of cement and coal used as fuel for the cement plants is allowed at zero rated customs duty
and 16 percent sales tax. As per investment policy of the government the import of plant, machinery &
equipment for manufacturing sector is allowed at 5 percent customs duty.

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Pakistan cement factories continue to make significant progress in cement exports. Now Pakistan is
ranked 5th in the world's cement exports after a huge increase of 47 percent in exports during last fiscal
year.

According to the Global cement report, China maintained first position with 26 million tonnes in exports,
while Japan got second position by exporting 12.6 million tonnes of cement. Third largest cement exporter
in world is Thailand with around 12 million tonnes, followed by Turkey which exported 11.6 million tonnes
of cement. Pakistan now at 5th position has left Germany behind by exporting 11 million tonnes of cement
during last fiscal year. Germany now stands at 6th position with 9 million tonnes exports.

Cement market experts told that Pakistan secured 5th position because of high demand of cement in
nearby countries and by capturing new markets such as African countries, Qatar & Iraq. Pakistan could
achieve the mark of 13 to 14 million tonnes exports by the end of the fiscal year keeping in view Indian
market which has once again started importing cement from Pakistan. The export of cement from
Pakistan to India showed a sharp decline after Mumbai attacks.

Demand Supply Production of Cement

Million Tonnes

Installed Capacity 39
No. of Units 29
Local Demand (2007-08) 22.6
Production 2008-09 19.2
Projected Capacity 2010-11 48
According to the All Pakistan Cemen Manufacturers Association (APCMA), local dispatches were 19.3
million tonnes (down 14 percent YoY) however exports showed an encouraging increase of 47 percent
(YoY to 11.3 million tonnes) during the last fiscal year.

According to experts, important factors contributing towards growth of cement sector are "Record Public
Sector Development Programme allocation (Rs.621 billion) in the budget FY10, reduction in excise duty
by Rs.10 per bag and declining interest rate scenario.

Local demand of cement in Pakistan will remain on high side due to the reconstruction activities of
devastated homes, shops and schools in Swat and Malakand after Military operation. Overall Pakistan
cement industry dispatches are likely to grow 7 percent in July 2009. The growth in cement dispatches is
solely attributable to rising export volumes as domestic demand remained depressed on every
comparable time period.

Overall cement plants of Pakistan operated at 80 percent capacity utilization as compared with 81 percent
utilization in the same month of last year. Although Fauji Cement has claimed 100% utilization during last
year. Cement exports of Pakistan continue to show healthy and positive growth trend and recorded 45
percent growth on Y-o-Y basis. However, on M-o-M basis, cement exports represented a decline of 3
percent.

Weight of sea based cement exports during the month was recorded at 68 percent in overall cement
exports as compared to 63 percent in July 2008. It is important to note that cement exports to India during
the month were recorded at 63,000 tonnes, which is lower when compared with the initial monthly
average of 100,000 tonnes.