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CEMENTNovember 2010
Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
2
Advantage India
Advantage
India
Substantial
capacity
expansion
The sector is expected to add
an additional capacity of 92.3
MT by 2013. As a result, the
industry will have a total
installed capacity of 383.5 MT
by March 2013.
Second-
largest cement
producer in the
world
India is the second-largest cement producer in the world, with an installed capacity of
about 236 million tonnes (MT) in 2009–2010.
Total FDI in the cement sector between April 2000 and August
2010 stood at US$ 1.9 billion.
Increasing interest
from foreign players
The cement industry
employed 140,000 people in
2009.
Modern and
eco-friendly
technology
The industry has witnessed
continuous modernisation and
adoption of new technologies.
Almost 93 per cent of the total
capacity is based on eco-
friendly dry process
technology.
Industry
performance
indicators on an
incline
Between 2005–2006 and 2009-
2010, domestic sales and
realisation of cement has been
estimated to have grown at a
CAGR of 18.4 per cent and
10.6 per cent, respectively.
Sources: ―Industry‖, Cement Manufacturers Association of India website, http://www.cmaindia.org/portal/industry/highlights.aspx, accessed 10 November 2010;
IAS, 10 November 2010, Centre for Monitoring Indian Economy
―Fact Sheet on Foreign Direct Investment (FDI)‖, Department of Industrial Policy and Promotion website, www.dipp.nic.in, accessed 10 November 2010
Cement November 2010ADVANTAGE INDIA
Employment
generation
3
Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
4
• The installed capacity in the Indian cement market was 236 MT in 2009–2010.
• Installed capacity has increased at a compound annual growth rate (CAGR) of 8.8 per cent between 2004–05 and 2009–2010.
• The production of cement in 2009–2010 was 200.7 MT.
• The turnover of the cement industry has been estimated at US$ 15.7 billion in 2009–2010.
• The Cement Manufacturers’ Association of India (CMA) estimates the industry manpower at about 140,000 as on 31 March 2009.
• Cement players in India produce different types of cement, based on different compositions such as ordinary portland, portland pozzolana, portlandblast furnace slag cement, white cement and specialised cement.
Market overview
Sources: CMIE, Cement Manufacturers’ Association; Ernst &
Young analysis
MARKET OVERVIEW
All-India cement installed capacity growth
(in MT)
154.3 160.2168.0
198.3211.8
235.9
0
50
100
150
200
250
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
All India cement capacity growth
Cement November 2010
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Market segments … (1/2)
MARKET OVERVIEW
Cement industry
Central North SouthWestEast
• The cement industry in India can be divided into five geographical zones of India — north, south, east,
west and central — based on localised variations in the consumer profile and supply-demand scenario.
Cement November 2010
6
• The south zone is the largest market, with the
highest installed capacity of 67 MT, followed by
the north zone with about 48 MT, in 2009.
23%
16%
14%14%
33%North
West
Central
East
South
Regional share of installed capacity (2009)
MARKET OVERVIEW
Market segments … (2/2)
Sources: CMIE; Ernst & Young analysis
Cement November 2010
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• Key markets in northern India include the states of Rajasthan, Punjab, Haryana and the National Capital Region (NCR).
• Demand in this region is being driven by growth in infrastructure, and residential and commercial construction. In the past few years, demand has been fuelled further by the metro project in Delhi NCR.
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
22.8 24.227.0
29.833.5
35.1
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
2004 2005 2006 2007 2008 2009
25.2 26.729.7
32.1
36.5
41.2
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2004 2005 2006 2007 2008 2009
Cement November 2010
Market segment — North
Cement consumption — north zone
(in MT)
Cement production — north zone
(in MT)
8
• The states of Maharashtra and Gujarat are the key markets in this region.
• Over the past few years, growth in housing and commercial real estate has augmented the demand for cement in this region.
• The western region also exports cement to countries in the Middle East.
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
22.524.5 25.9
28.3
32.233.9
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
2004 2005 2006 2007 2008 2009
21.022.7
24.927.3
28.7 28.4
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004 2005 2006 2007 2008 2009
Cement November 2010
Market segment ― West
Cement consumption — west zone
(in MT)
Cement production — west zone
(in MT)
9
• The state of Uttar Pradesh is the key market in this region.
• The demand for cement in this region has primarily grown due to an increase in the number of housing and infrastructure projects.
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
18.920.4 20.5
22.423.7
26.2
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004 2005 2006 2007 2008 2009
18.5 20.4
22.3 24.0 25.0 26.1
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004 2005 2006 2007 2008 2009
Cement production — central zone
(in MT)
Cement November 2010
Market segment ― Central
Cement consumption — central zone
(in MT)
10
• The key markets in the east are the states of West Bengal, Orissa and Bihar.
• Growth in housing and industrial activity are primarily driving demand for cement in this region.
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
17.4
20.322.6
23.925.3
28.2
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004 2005 2006 2007 2008 2009
16.618.7
20.022.0
23.825.9
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004 2005 2006 2007 2008 2009
Cement November 2010
Market segment — East
Cement consumption — east zone
(in MT)
Cement production — east zone
(in MT)
11
• Key markets in the southern region are the states of Tamil Nadu, Andhra Pradesh and Karnataka.
• The south zone has witnessed increased capacity in last few years due to its rich limestone reserves.
• Growth in the real estate market in the region, coupled with the development of key infrastructure projects such as airport and metro rail, has resulted in increased demand for cement in this region.
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
31.9 31.5
39.344.4
49.254.3
0.00
10.00
20.00
30.00
40.00
50.00
60.00
2004 2005 2006 2007 2008 2009
36.1 36.944.9
49.854.2
59.7
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004 2005 2006 2007 2008 2009
Cement November 2010
Market segment ― South
Cement consumption — south zone
(in MT)Cement production — south zone
(in MT)
12
• The housing segment accounts for a major portion of the total domestic demand for cement in India.
• According to the Eleventh Five Year Plan (2007–2012), housing demand is estimated to increase from more than 24 million units in 2007 to more than 26 million units at the end of the Plan period.
• Growing urbanisation, an increasing number of households and higher employment are primarily driving the demand for housing.
• The Government of India (GoI) initiatives are expected to provide impetus to construction activity in rural and semi-urban areas through large infrastructure and housing development projects.
Growth drivers
• The GoI is strongly focusing on infrastructure development to boost the growth in the economy. It plans to increase investment in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan (2012–2017), as compared with US$ 514 billion under the Eleventh Five Year Plan (2007–2012).
• Infrastructure projects such as the Dedicated Freight Corridors (DFCs) as well as new and upgraded airports and ports are expected to further drive construction activity.
• The GoI intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and further reduce its transportation costs.
• The demand for commercial real estate (CRE) segments, comprising retail space, office space and hotels, as well as civic facilities including hospitals, multiplexes and schools, has been on the rise due to growth in economy.
• The demand for office space in India is being driven by the increasing multinational companies and the growth of the services sector.
• Strong growth in tourism, including both business and leisure travel, has increased the construction of hotels in the country.
• With the rise in population and change in consumer behavior demand for civic facilitates has been witnessing a trajectory growth.
Housing Infrastructure Commercial real estate
MARKET OVERVIEW
Cement November 2010
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Changing technological profile
• Technological profile of the cement industry has changed significantly in the last two decades as a result of the increased adoption of energy efficient technologies and processes. The Indian cement industry has become a forerunner in energy-efficient cement manufacturing in the world with some of the plants operating at the lowest energy consumption levels. Notably, about 93 per cent of the total capacity is based on eco-friendly dry process technology.
Volatile cement prices
• Cement prices have witnessed an upward trend across regions over the past few years due to a constricted supply scenario and an increase in input costs. However, prices are expected to stabilise or decline in the near future, as supply rises as a result of capacity expansions and players focus on captive power generation to reduce input costs.
Key trends
Sources: CMIE; Ernst & Young analysis.
MARKET OVERVIEW
Cement November 2010
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• The Indian cement industry comprises 148 large and around 365 mini cement plants, including public sector units. Large producers contribute about 95 per cent to the installed capacity, while mini plants account for the rest.
• Industry comprises a few large players with a pan-India presence as well as several regional and stand-alone players. There are primarily two groups with pan-India presence ― Holcim Group (comprising ACC and Ambuja Cements) and Aditya Birla Group (including Grasim Industries, UltraTech and Century Textiles).
• Shree Cement, India Cement, Lafarge, Jaypee Group and Binani are regionally focused players.
• Holcim Group and Aditya Birla Group have emerged as the largest players in the Indian cement industry, with a market share of 46 per cent and 38 per cent, respectively, in 2009.
Key players
Sources: CMIE, Ernst & Young analysis; Cement
Manufacturers’ Association of India website,
www.cmaindia.org/industry.html, accessed 10 November
2010.
Market share (production) of key players
(2009)
38%
11%
46%
5%
Aditya Birla Group
India Cement Group
Holcim (F) Group
Jaiprakash Group
MARKET OVERVIEW
Cement November 2010
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Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
16
• Between April 2000 and August 2010 total FDI in the cement sector was US$ 1.9 billion.
• Most cement companies have announced expansion plans for 2010–11, which is expected to result in a fresh capacity of more than 40 MT in 2010–11. Some new cement projects in the pipeline expected to be completed by March 2013 include:
Company ProjectInvestment
(US$ million)Capacity (MT)
ABG Cement Ltd Cement plant at Kutch, Gujarat 380.4 3.3
Jaiprakash
Associates
Clinker and cement plant in
Jaggayyapeta, Krishna, Andhra Pradesh358.7 8.6
My Homes Inds LtdCement project in Guntur, Andhra
Pradesh239.1 3.0
Cosmos cement Ltd Jaintia hills green field cement projects 210.2 3.4
J K Cement Ltd Mangrol cement expansion project - 2.2
Sources: CMIE; Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to August 2010, Department of Industrial Policy and Promotion.
Investments
INVESTMENTS
Cement November 2010
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Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
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• Regulatory scenario
• The Ministry of Mines regulates the mining sector, while the states own the minerals sector in their respective territories in India
• FDI of up to 100 per cent is allowed in the mining sector under the automatic route for cement production.
• National Mineral Policy (NMP) 2008
• The NMP aims to achieve the twin goals of large-scale prospecting with optimal mining and attracting investments with the latest technology.
• To implement comprehensive reforms stated in the NMP, the GoI has proposed a new legislation and amended the existing Mines and Minerals (Development and Regulation) Act. This legislation is expected to enhance the country’s regulatory environment by making it simple and transparent.
Policy and regulatory framework … (1/2)
POLICY AND REGULATORY FRAMEWORK
Cement November 2010
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• The impact of the Union Budget 2010–11
• Excise duty has been increased by 2 per cent.
• A budget allocation of US$ 36.16 billion has been made for India’s infrastructure development. Heightened focus on railways, housing, urban infrastructure and continued easy financing of the projects is expected to give impetus to the construction sector.
• Further, the additional deduction available for investment in long-term infrastructure bonds for individuals is expected to speed up the execution of infrastructure projects.
Sources: Ministry of Mines, Government of India, ―Doing Business in India, 2010‖, Ernst & Young report; ―India Budget,‖ 2010, Ernst & Young.
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework … (2/2)
Cement November 2010
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Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
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Opportunities
Increased
government focus
on infrastructure
development
Increased demand
for housing segment
Sources: ―Industry,‖ Cement Manufacturers Association of India website, http://www.cmaindia.org/portal/industry/highlights.aspx, accessed 11
November 2010
―Eleventh Five-year plan (2007–2012),‖ Planning commission, Government of India website, http://planningcommission.nic.in/, accessed 11 November
2010
―Fact sheet,‖ Special economic zones in India website, http://www.sezindia.nic.in/index.asp, accessed 10 November 2010
―Economic Survey 2009–2010‖, Union Budget & Economic Survey Website, http://indiabudget.nic.in, accessed 10 November 2010.
―Industry overview,‖ Confederation of Real Estate Developers’ Associations of India website, http://www.credai.org/,accessed 10 November 2010
The Indian cement industry has been on a high-growth trajectory led by buoyancy in sectors such as real
estate, infrastructure and construction.
Cement November 2010OPPORTUNITIES
• The GoI plans to increase its investment in infrastructure to US$ 1 trillion in the Twelfth Five Year Plan
(2012–17) as compared with US$ 514 billion expected to be spent on infrastructure development
under the Eleventh Five Year Plan (2007–2012) .
• Union budget 2010–11 plans a total outlay of US$ 6.4 billion on rural housing, roads and bridges.
• Formal approval has been granted to 577 SEZ proposals and 363 have already been notified as SEZs, as
of August 2010.
• Infrastructure projects such as the dedicated freight corridors (DFC), upgraded and new airports and
ports are expected to enhance the scale of economic activity, leading to a substantial increase in
demand.
• According to the Eleventh Five Year Plan (2007–2012), there is an increasing demand for housing in the
country, especially in the economically weaker section (EWS)/low-income group (LIG).
• The housing segment accounts for major proportion of the total domestic demand for cement in India.
Given the intense shortage of housing in the country, this segment has been the primary demand driver
for the industry.
22
Opportunities
Sources: ―Industry,‖ Cement Manufacturers Association of India website, www.cmaindia.org/industry.html, accessed 11 November 2010
―Industry overview,‖ Confederation of Real Estate Developers’ Associations of India website, http://www.credai.org/,accessed 12 August 2010
―Fact Sheet on Foreign Direct Investment (FDI)‖, Department of Industrial Policy and Promotion website, www.dipp.nic.in , accessed 10 November
2010
Increase in
development activity
in commercial real
estate (CRE) and
other segments
Huge potential for
growth to increase
per capita
consumption of
cement
Cement November 2010OPPORTUNITIES
• The demand for office space in India is being driven by the influx of multinational companies and the
growth of the services sector, especially the IT-BPO industry. Progressive liberalisation and easing of
FDI norms in various sectors paved the way for growth in FDI, which led to a burgeoning demand for
office space from MNCs and other foreign investors.
• Growth in organised retailing and the entry of international retailers into India has fuelled the demand
for good quality mall space.
• Strong growth in tourism, including both business and leisure travel, has increased the construction of
hotels in the country.
• The real estate sector contributes 5 per cent to India’s GDP and is expected to reach a size of US$
180 billion by 2020.
• Upcoming industrial clusters and infrastructure development in emerging tier-II and tier-III cities are
also likely to fuel demand in the sector.
• The growing population and increased urbanisation in the country has increased the need for more
civil facilities.
• Though India is the second-largest producer and consumer of cement in the world, there is a
significant potential to increase the per capita consumption of cement in the country in comparison to
other countries. The per capita consumption of cement in India is 143 kg, as compared with other
countries such as China (1,014 kg) and Japan (524 kg), which indicates significant potential for growth.
23
Advantage India
Market overview
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
CEMENT November 2010
24
Cement Manufacturers' Association
CMA Tower, A-2E, Sector 24 NOIDA – 201 301
Uttar Pradesh, India
Phone: 91-120-2411955, 2411957, 2411958
Fax: 91-120-2411956
E-mail: [email protected]
Website: www.cmaindia.org/index.html
National Council for Cement and Building Materials
34th Milestone, Delhi-Mathura Road, Ballabgarh – 121 004 Haryana, India
Phone: 91-129-2242051/52/53/54/55/56; 4192222
Fax : 91-129-2242100; 2246175
E-mail: [email protected]; [email protected]
Website: www.ncbindia.com
Industry associations … (1/2)
INDUSTRY ASSOCIATIONS
Cement November 2010
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Indian Concrete Institute
Ocean Crest 79, Third Main Road, Gandhi Nagar, Adyar, Chennai – 600 020
Phone: 91-44-24912602
Fax: 91-44-24455148
E-mail: [email protected], [email protected], [email protected]
Website: www.indianconcreteinstitute.org
Industry associations … (2/2)
INDUSTRY ASSOCIATIONS
Cement November 2010
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Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number.
Conversion rate used: US$ 1= INR 48
NOTE
Cement November 2010
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CEMENT November 2010
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