Cement India
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The document analyzes the cement industry in India from 2015-2020. It identifies key drivers for growth such as increasing construction activity and infrastructure development in emerging economies, rising domestic demand, and greater government investment. The industry is forecast to have strong production and value growth over the period. Opportunities for cement companies include the growing precast concrete market and developing the underserved northeast region of India.
Cement India
- 1. CEMENT INDUSTRY - INDIA The document outlines the outlook and forecasts for the cement industry in India. It analyses the drivers and challenges for the industry in the five year period from 2015 - 2020. LIZA DSOUZA
- 2. Overview Concrete is one of the basic elements needed for se2ng up strong and healthy infrastructure. Cement, therefore plays an important role in the economic as well as socio-economic development of a country. According to the Ministry of External A鍖airs, Government of India, India was the second-largest producer as well as consumer of cement in the world in 2015 (Karkun, 2015). The United States Geological Survey stated that in 2014, India produced 280 MT of cement and had a clinker producPon capacity of 280 MT per annum. Increasing investments by the government, relaxaPon of FDI norms in the construcPon sector, and the growing construcPon sector in emerging economies are expected to drive the growth of cement industry in the country (Saunders, 2015). Drivers Growth in the construc.on industry and Emerging Economies The key parameter that de鍖nes the growth of the cement industry is increasing disposable income, which leads to availability of fund for new construcPons and infrastructure development acPviPes. The largest importer of cement from India is Sri Lanka, followed by Saudi Arabia, the U.S., Maldives, the U.A.E, Nigeria, Qatar, and Bangladesh. Some of the drivers for the increasing demand for cement from these countries are the growing GDP of these developing economies as well as its growing focus on housing and infrastructure development. In 2011, countries such as the U.A.E and Saudi Arabia received construcPon projects worth USD 319.1 billion and USD 218.9 billion, respecPvely (McCa鍖rey, 2016). These countries are undertaking projects in the infrastructure and residenPal/non-residenPal segments. According to a report published by Accenture, Ptled Seven Trends Transforming the ConstrucPon Marketplace, the construcPon market in developing economies is projected to double over the next decade to reach USD 6.7 trillion. Increasing domes.c demand and Government Investments Over the past few months India has experienced a pickup in macro-economic trends, which displays a posiPve outlook towards the future. The Finance Minister of India, Mr. Arun Jaitley has built upon a pragmaPc approach which consPtutes a long-term plan that would combine investments, policy reforms, and improved regulaPons to provide a right environment for growth over the coming years and decades. This Growth Oriented approach has envisioned a GDP growth of 8% in 2016, while a double digit growth is expected by 2020. The Government of India (GoI) has increased its investments in housing and infrastructure development. In August 2015, the GoI allocated USD 7.5 billion to develop 100 smart ciPes
- 3. across the country (D, 2015). The current budget has proposed the creaPon of NaPonal Investment in Infrastructure funds which will invest in the public-sector infrastructure 鍖nancing companies; this funding will allow them to leverage their higher credit raPngs for investments from the domesPc and internaPonal debt markets. Fresh allocaPon of USD 2.25 billion has been made to build up roads and USD 1.6 billion for railways. In order to support infrastructure growth, the government has also announced in the budget a roadmap of investments accounPng to USD 138 billion for the next 鍖ve years. ResidenPal construcPons accounted for 67% of the construcPon acPviPes taken up in India in 2015 and is esPmated to grow at a high CAGR due to urbanizaPon, industrializaPon, development of megaciPes, township projects, IT parks, growing real-estate market, and easy availability of 鍖nance. According to the 12th Five Year Plan, i.e. 2012-2017, the government plans to invest USD 1 trillion in infrastructure development (IBEF, 2016). Increasing FDI Investments FDI is a criPcal driver of the economic growth of the country. The GoI has relaxed FDI norm in the construcPon sector which would boost foreign investments the residenPal, commercial, and industrial sectors of India. The major constraints to gain FDI access in the construcPon sector, such as minimum built up area, exit barriers, and minimum capital requirement, have been relaxed; therefore the size of the project wouldnt be a concern any longer. According to the Department of Industrial Policy and PromoPon (DIPP), the FDI investments received for construcPon development from April 2013 to September 2015 was USD 24.16 billion. The governments e鍖orts with respect to relaxing FDI norms in the construcPon sector and improving the ease of doing business in India has led to an increase in FDI through the Foreign Investment PromoPon Board (FIPB) route by 26 percent to USD 31.9 billion in the year 2015 against USD 25.3 billion in 2014. FDI accumulaPon, through April 2000-September 2015, in cement and gypsum products accounted for USD 3.1 billion (CMA, 2015a). Opportunities Precast concrete market in India While major residenPal construcPons in India peruse built in-situ model, Indias commercial and industrial construcPon sector has been experiencing a rise in the use of precast construcPon technologies. The market for precast construcPon in India is expected to grow at a CAGR of 7% during 2015-2020. The precast market of India gives cement companies an opportunity to move forward in its value chain. Also the rise in residenPal and non-residenPal construcPon and infrastructure development
- 4. acPviPes act as drivers to the precast concrete market which will in turn increase the demand for cement in the county. North East India North East India comprises of states such as Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura. The North East Industrial and Investment Policy, 2007, devised by the Indian government, is expected to catalyze infrastructure and industrial development in these states. The cement manufactured locally in this region is not su鍖cient for the demand they face (Bloomberg, 2015). The demand-supply gap experienced in these states impels them to purchase cement from other parts of India. High transportaPon cost causes cement prices to rise considerably in this region. Companies such as Dungsam Cement (Bhutan) are entering the India market with its main focus on North East India (CMA, 2015b) Future Forecast e-es$mated; p-projected Year 2013 2014 2015-e 2016-p 2017-p 2018-p 2019- p 2020 -p CAGR (2015-20 20) Production (MT) 223.45 250.00 279.83 313.89 352.77 396.82 448.34 506.62 12.61% Value (USD Billion) 20.45 23.00 25.93 29.35 33.36 37.98 43.62 50.66 14.34%
- 5. Bibliography Bloomberg. (2015). Aditya Birla Corporate PresentaPon. CMA. (2015a). Cement Exports (online). from Cement Manufacturer's AssociaPon hpp:// www.cmaindia.org/industry/contribut/exports.html CMA. (2015b). Rajasthan plans to divest stake in 8 thermal power units (online). Retrieved 24 Feb 2016, from Cement MAnyfacturer's AssociaPon hpp://www.cmaindia.org/updates/news-archives.html D, S. (2015). Cement sector eyes growth in FY16 (online). Retrieved 24 Feb 2016, from Business Insider hpp://www.business-standard.com/arPcle/companies/cement-sector-eyes-growth-in- fy17-115051201144_1.html IBEF. (2016). Cement. (January). Karkun. (2015). Current Challenges and OpportuniPes in the Indian Cement Sector. Project Reporter, 17(March). McCa鍖rey, R. (2016). Global Cement MAgazine (online). Retrieved 23 Feb 2016, from Global Cement hpp://www.globalcement.com/pdf/eGCFeb2016ns.pdf Saunders, A. (2015). The highs and lows of Indias cement industry (online). Retrieved 24 Feb 2015, from Global Cements hpp://www.globalcement.com/magazine/arPcles/919-the-highs-and-lows-of- india-s-cement-industry