Cement Industry Analysis

Topics: India, Cement, Portland cement Pages: 6 (1615 words) Published: April 14, 2011
Industry Analysis of-
Cement Sector

Prepared by:
1) Ritika Khare
2) Divya Nangia
3) Vidya Rajgopal
4) Pawan Thakare
5) Dhananjay Limaye
6) Mrugen Shah

1) Nature of the Industry
The word Cement has come from the Roman word ‘Opus Caementicium’. In general, the word cement means binder- a substance, which when gets set and hardens, binds itself independently with other substances. Joseph Aspdin, a British stonemason, invented cement way back in 1824.(Portland Cement Association 2010) INTRODUCTION TO THE INDIAN CEMENT INDUSTRY

In 1914, the first licensed cement-manufacturing unit in India was set-up by the India Cement Company Ltd. With the boom in the economy-growth rate of India, the cement industry is seeing a great future. India has now become the second largest cement producer in the world after China, with a total capacity of 151.2 Million Tones, contributed by around 125 large and 300 mini cement plants. Further growth in the Indian cement industry is expected in the coming years. It is expected that by FY12, the cement production capacity will rise up to 262.61 Million Tones. The cement industry in India is dominated by around 20 companies, some of the major Cement players in India are Company| Production| Installed Capacity|

ACC| 17,902| 18,640|
Gujarat Ambuja| 15,094| 14,860|
Ultratech| 13,707| 17,000|
Grasim| 14,649| 14,115|
India Cements| 8,434| 8,810|
JK Group| 6,174| 6,680|
Jaypee Group| 6,316| 6,531|
Century| 6,636| 6,300|
Madras Cements| 4,550| 5,470|
Birla Corp.| 5,150| 5,113|

(Mapsofindia.com 2010) (Tradechakra 2008)

Demand & Supply Analysis
The main demand drivers for the industry are as following,
* REAL ESTATE: The boom in the cement industry in India came in 2003, when the real estate rates started rising. Over the past few years (FY03-07), cement demand has grown at a CAGR of 8.37% which is higher than the CAGR of supply at 4.84%. Real estate sector is the key driver and accounted for almost 55% of cement demand in FY 07. (Jelsoft Enterprises 2010)

* INFRASTRUCTURE: In this FY10 budget, the Government will be spending Rs. 1.73 trillions on infrastructure. With many international events like Commonwealth games 2010, Hockey World Cup 2010, Cricket World Cup 2011 etc, the need to develop world class infrastructure was felt in early 2000’s. As a result, many new multi billion dollars project were sanctioned to develop roads, metros, airports, railway stations etc all across the country, thus, boosting the demand for cement.

Swot Analysis
A) Strengths:
* Second largest in the world in terms of capacity:
In India there are approximately 124 large and 300 mini plants with installed capacity of 200 million tonnes. * Low cost of production:
due to the easy availability of raw materials and cheap labor. B) Weakness:
* Effect of global recession on real estate:
The real estate prices are stabilizing and facing steady slowdown especially in metros. There are approximately one hundred thousand completed flats without occupancy in Bangalore. There has been drastic reduction in property prices due to reduced demand and increased supply. * Demand-Supply gap, overcapacity:

The capacity additions distort the demand-supply equilibrium in the industry thereby affecting profitability. * Increasing cost of production due to increase in coal prices. * High Interest rates on housing:

The re-pricing of the interest rates in the last four years from 7% to 12% has resulted in the slowdown in residential property market. C) Opportunities:
* Strong growth of economy in the long run:
Indian economy has been one of the stars of global economics in the recent years, growing 9.2% in 2007 and 9.6% in 2006. However, India is facing tough economic times in 2008. * Increase in infrastructure projects:

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