India for PBG 01india

7/28/2019 India for PBG 01india

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INDIA

46 globalcementMAGAZINE February 2013

Peter Edwards, Global Cement Magazine

The Incredible Indian cement industry

Below - Figure 1: GDP/capita

(red)2 and cement production

data (blue)3 or India between

1990 and 2011. Both GDP/

capita and cement production

began to increase in the early

1990s amid economic liberali-

sation, but the ratio between

them is much higher than in

many other nations.

The Republic of India

occupies the bulk of

the Indian subcontinent,

the geographical region that

is also home to Bangladesh and

Pakistan in central southern Asia.

The worlds largest democracy1

and third largest economy in terms

of purchasing power parity, India is

the second most populous country

after China, a position also

held by its incredible

cement industry...

Many diverse populations have been attracted tothe ertile territories that constitute modern-day India over the millennia, combining to create a

unique modern culture. Peoples arriving rom parts

o modern Aghanistan, urkey and Arabia merged

with native Hindu cultures and the country ourished

as a trade cross-roads rom around 400 onwards,

with development o classical science, maths, art andwider culture.

In the early 16th Century the Mughal Dynasty

began ollowing invasion by central Asian warriors.

Te Mughal powers administered new administative

systems that encouraged market-based trade and

unied disperate groups through inclusive systems,

which enabled a period o increased political and

social stability.

At around the same time as the start o the Dynasty,

European explorers were developing staging posts

along the coast o modern India. By the turn o the

1800s, Great Britain had the largest inuence o the

colonial powers. Britain o-

cially ruled India rom 1858

to 1947, a period known

as the British Raj, that also

covered parts o modern-

day Pakistan, Myanmar and

Bangladesh.

In 1947 the Raj came to

an end when Britain passed

the Indian Independence

Act, which created the

states o India and Pakistan.

Tis arose due to constantpressure rom Indian na-

tionalists, who were led

in the the latter stages by

Mahatma Ghandi. Gandhi was amed or his policy

o non-violence and civil-disobedience to the ruling

British and is today known by Indians as the Father

o the Nation. oday, India is a key member o the

Commonwealth o Nations.

Economy

Indias economy is the third largest by GDP in terms opurchasing power parity but, with a very large popula-

tion, it ranks only 165th in GDP/capita terms.1 Gradual

de-centralisation o the economy since the early 1990s

has allowed the development o a more diverse market

economy that is increasingly driven by an educated

and business-minded middle class. Tis is highlighted

by Indias now world-amous telecomminications and

service sector, which has grown extensively over the

past decade.1

Increased variation has resulted in a reduction in

Indias agriculture dependency, although this sector

still supplies around 50% o the countrys income.

Manuacturing remains strong, representing more

than a quarter o output.

However, despite economic expansion and de-

velopment o its service sector, economic disparity

remains a severe problem or India. Almost a third o

Indians lived in poverty in 2011 and constant popula-

tion growth makes it hard to increase living standards.

For illustration, India welcomed its 1 billionth inhabit-

ant in 2000. In just 12 years since then the population

has increased to over 1.2 billion!

Cement industry - History4

Te indigenous Indian cement industry traces itshistory back to 1914, at a time when the market was

dominated by imports. In that rst year the industry

produced just 1000t o cement, but over just 10 years

0

20

400

600

800

1000

1200

1400

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

1600

0

50

100

150

200

250

GDP/capita(CurrentUS$)

Cementproduction(Mt)


2/8

this gure increased to 0.26Mt in 1924. In the same 10-

year bracket, India consumed a total o 2Mt o cement,

with around hal imported.

From a modern perspective the need to expand the

industry is clear. However, the industry was ghting

against poor public perception surrounding not only

domestic Indian cement, but cement itsel. Many pro-

ducers went out o business as a result o price-wars

between Indian producers who were aiming at a bigger

slice o the uture market.

o end the uncertainty surrounding the industry

and to campaign or taris on imported cement, the

Indian Cement Manuacturers Association (ICMA)

was set up in 1925. Tis subsequently transormed into

two connected groups. Te modern Cement Manuac-

turers Association (CMA) was reormed in 1961.

Between 1925 and the early 1940s, the capacity

o the Indian cement industry gradually increased

to 1.8Mt in 1942, with imports dwindling to just

~1000t/yr over the same period. However, all was

not well with the industry, which, like many in-dustries across the world, suered due to the Great

Depression in the United States and the run-up to the

Second World War in Europe. o combat continued

price wars, Associated Cement Companies (ACC) was

ormed rom 11 competing rms in 1936.

In 1942 all o Indias cement capacity came under

the control o Deence or India rules as part o the war

eort. With up to 90% o cement heading directly to

deence purposes, the apparent private market shrank

by a actor o 10. Afer the conclusion o the Second

World War, during which capacity reached 3.2Mt/yr,

controls stayed in place. From 1945 to 1956 the gov-ernment regulated prices directly.

However, it became increasingly obvious that

regulated prices rom central government could not

provide the cement that the country was demanding.

Te controls were relaxed in steps, with a ree market

rom 1989 onwards. Te result o de-regulation was a

massive expansion o cement capacity, which has since

only accelerated as the country has developed and

opened up its economy.

Cement industry - Overview

oday, the Indian cement industy is very large, second

only to China in terms o installed capacity, and has

grown at a very ast pace in recent years. Te rate o

growth over the past 20 years has been phenomenal,

as shown by Figure 1.3 Since 1992 Indias cement

production has more than quadrupled rom around

50Mt/yr to 220Mt/yr in 2011.

Although the Indian cement industry has some

multinational cement giants, like Holcim and La-

arge, which have interests such as ACC, Ambuja

Cement and Laarge Birla Cement, the Indian ce-

ment industry is broadly home-grown.5 Ultratech

Cement, the countrys largest rm in terms o ce-

ment capacity, holds around 22% o the domesticmarket, with ACC (50%-owned by Holcim) and

Ambuja (50%-owned by Holcim) having 15% and 13%

shares respectively.

Many o the remaining dozen top players are

Indian and are (in order o diminishing market share);

Jaiprakash Associates (10%), Te India Cements Ltd

(7%), Shree Cements (6%), Century extiles and

Industries (5%), Madras Cements (5%), Laarge (5%),

Birla Cement (4%) and Binani Cement (4%).

Between them the top 12 cement rms have around

70% o the domestic market.6 Around 100 smaller

players produce and grind cement on a wide range o

scales but are ofen conned to small areas.

Cement industry - Sustainability

Te Indian cement industry, though large, is also

one o the most thermally ecient, according to

the World Business

Council or Sustain-

able Developments

(WBCSD) Cement

Sustainability Initia-

tives (CSI) Getting the

Numbers Right (GNR)data programme.7

In 2010, the most

recent year or which

data is available, India

perormed very avour-

ably in terms o specic

energy consumption per tonne o clinker produced,

with an average 3130MJ/t across the 50% o cement

capacity that the GNR programme received data on.

Brazil and China, which also have rapidly-developing

large cement industries, perormed slightly less well.7

In all three cases, it is the recent expansion o theindustry in that nation that provides this thermal e-

ciency, a consequence o modern plants simply being

more ecient than older ones. Te comparison with

the EU27 group o countries (and the USA to a greater

extent), both o which have older industries, is clear.

In the specic case o India, the eciency o the

new capacity is enhanced by the work o dedicated

plant engineers who seek to maximise the eciency o

the equipment in ront o them. Te act that (expen-

sive oreign) coal is the dominant uel or the cement

industry acts as a strong driver towards eciency. Coal

is also a reliable and stable kiln uel, which means that

Indian kilns can be very nely tuned and hence can be

made more ecient than i a less reliable or variable/

alternative uel mix were to be used.

When it comes to CO2 emissions per tonne o

clinker, India perorms

less well, making 837kg/t

o clinker.7 Tis is close

to the global average but

behind those industries

that have successully

implemented alternative

uel substitution such as

Germany. See page 18or more on alternative

uels in the Indian ce-

ment industry,

Above - Figure 2: Specic

energy consumption

(MJ/t o clinker) or diferent

countries and world regions

in 2010.7 India had the low-

est such energy requirement

o any major cementindustry in that year.

INDIA

globalcementMAGAZINE February 2013 47

0

500

1000

1500

2000

2500

3000

3500

4000

Specifcenergyconsumption(MJ/tclinker)

4500

EU27USA ChinaBrazilGermany IndiaWORLD

EU27USAChina Brazil GermanyIndia WORLD

100

200

300

400

500

600

700

800

900

1000

0

SpecifcCO2emissions(kg/tclinker)

Below - Figure 3: SpecicCO2 emissions (kg/t o clink-

er) or diferent countries and

world regions in 2010.7

NOTE: GNR values are re-

ported voluntarily by industry

participants and so do not

represent actual averages.

Coverage by region/country:

Brazil = 71%, China = 5%,

EU27 = 96%, Germany 96%,

India = 50%, USA = 77%,

World = 25%.7


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INDIA

16,70

32,67

23,189

41,107

155,164,89

9,66,133

80,144

79,150

14,62,100,116191,198

83,200,148,114,140,137,153,154,168

59,60,61,64,78,

122,123,170,194

36,65,77,147201,84,177,149

3,19,57,136,179

108,145166,152

115,132,143

103,182

128,169

7,109

186

185

192

199124

178

127

131

130

183

117

162

159101

174

195

197

157,161

102104175

158188

98

25

42

43

171

156

163 106

97

38

71

82

34

10

INDIA

ArabianSea

NEW DELHI

Pakis

tan

Mumbai 73

Bhopal

Hyderabad

Kerala

Shimla 18,180

Pakis

tan

Aghanistan


1. ACC, 1.2Mt/yr.

2. ACC, 0.9Mt/yr.

3. ACC, 3.7Mt/yr.

4. ACC, 0.5Mt/yr. (Grinding)

5. ACC, 4.4Mt/yr.

6. ACC, 1.58Mt/yr.

7. ACC,1.1Mt/yr. (Grinding)

8. ACC, 2.7Mt/yr.

9. ACC, 1.5Mt/yr.

10. ACC, 1.1Mt/yr.

11. ACC, 1.0Mt/yr. (Grinding)12. ACC, 1.6Mt/yr.

13. ACC, 3.0Mt/yr.

14. ACC, 5.8Mt/yr.

15. Adhunik Cement (Dalmia Bharat Enterprises), 1.5Mt/yr.

16. Ambuja Cements, 5.5Mt/yr.


18. Ambuja Cements, 0.5Mt/yr. (Grinding).


20. Ambuja Cements, 1.5Mt/yr (Grinding).


22. Ambuja Cements, 1.0Mt/yr. (Grinding).

23. Ambuja Cements, 12.Mt/yr (Grinding).



26. Ambuja Cements,1.0Mt/yr. (Grinding).

27. Ambuja Cements, 2.5Mt/yr. (Grinding).28.Ambuja Cements,1.5Mt/yr. (Grinding).

29. Amrit Cement Industries Limited, 1.0Mt/yr.

30. Andhra Cements (Jaypee Group), 0.9Mt/yr.

31. Andhra Cements (Jaypee Group), 0.6Mt/yr. (Grinding).

32. Anjani Portland Cement, 1.30Mt/yr.

33. Asian Concretes & Cements, 1.30Mt/yr.

34. Bagalkot Cement & Industries, 0.30Mt/yr.

35. Barak Valley Cement, Barak Cement, 0.33Mt/yr.

36. Bharathi Cement Corporation, 5.0Mt/yr.

37. Bhavya Cements, 1.4Mt/yr.

38. Bheema Cements, 0.9Mt/yr.

39. Bhilai Jaypee Cement.

40. Bhilai Jaypee Cement, 2.2Mt/yr. (Grinding).

41. Binani Cement, 4.9Mt/yr.

42. Binani Cement, 1.4Mt/yr. (Grinding).43. Birla Corp., 2.5Mt/yr.

44. Birla Corp., 1.7Mt/yr.

45. Birla Corp., 1.6Mt/yr (Grinding).

46. Birla Corp., 0.6Mt/yr. (Grinding).

47. Bokaro Jaypee Cement, 2.1Mt/yr. (Grinding).

48. Burnpur Cement, 0.3Mt/yr.

49. Burnpur Cement, 0.3Mt/yr.

50. Calcom Cement India, 2.1Mt/yr.

51. Cement Corporation o India, 0.2Mt/yr.



54. Cement Manuacturing Co., 0.6Mt/yr.

55. Century Textiles & Industries, 2.1Mt/yr.



58. Century Textiles & Industries, 1.0Mt/yr.59. Chettinad Cement Corp., 5.5Mt /yr.

60. Chettinad Cement Corp., 4.3Mt /yr.



63. Dalmia Bharat Enterprises, 2.5Mt /yr.

64. Dalmia Bharat Enterprises, 4.0Mt/yr.

65. Dalmia Bharat Enterprises, 2.5Mt/yr.

66. DCM Shriram Consolidated, 0.4Mt/yr.

67. Deccan Cements, 1.79Mt/yr.

68. Encore Cement & Additives, 0.40Mt/yr. (Grinding).

69. Green Valley Industries, 1.0Mt/yr.

70. Gujarat Sidhee Cement, 1.2Mt/yr.

71. HeidelbergCement India, 0.6Mt/yr.

72. HeidelbergCement India,1.0Mt/yr.

73. HeidelbergCement India, 1.0Mt/yr. (Grinding).74. HeidelbergCement India, 0.5Mt/yr. (Grinding).

75. Hills Cement Company, 1.0Mt/yr.

76. The India Cements, 1.1Mt/yr. (Grinding).

77. The India Cements, 1.4Mt/yr.



80.The India Cements, 1.1Mt/yr. (Grinding).

81. The India Cements, 0.86Mt/yr. (Grinding).




85. Jaiprakash Associates, 2.5Mt/yr. (Grinding).

86. Jaiprakash Associates, 0.5Mt/yr.


88. Jaiprakash Associates, 2.2Mt/yr.89. Jaiprakash Associates, 2.4Mt/yr.









98. Jammu & Kashmir Cements, 0.4Mt/yr.

99. Jaypee Cement, 1.0Mt/yr.

100. Jaypee Cement, 0.60Mt/yr.

101. JK Cement, 0.47Mt/yr.



104. JK Cement, 3.3Mt/yr.105. JK Lakshmi Cement,

0.6Mt/yr. (Grinding).

106. JK Lakshmi Cement,

0.6Mt/yr. (Grinding).

107. JK Lakshmi Cement, 4.2Mt/yr.

108. JSW Cement, 4.5Mt/yr.

109. JSW Cement, 0.70Mt/yr.

110. JUD Cement, 0.50Mt/yr.

111. Kalyanpur Cements, 1.0Mt/yr.

112. The KCP, 0.7Mt/yr.

113. The KCP, 1.52Mt/yr.

114. Keerthi Industries, 0.6Mt/yr.

115. Kesoram Industries, 1.5Mt/yr.

116. Kesoram Industries, 5.8Mt/yr.

117. Khyber Industries, 0.4Mt/yr.118. Laarge India, 1.6Mt/yr.

119. Laarge India, 4.6Mt/yr. (Grinding).

120. Laarge India, 1.0Mt/yr. (Grinding).

121. Laarge India, 0.6Mt/yr.

122. Madras Cement, 3.1Mt/yr.


124. Madras Cement, 0.5Mt/yr. (Grinding).





129. Madras Cement, 0.50Mt/yr. (Grinding).

130. Malabar Cement, 0.20Mt/yr. (Grinding).

131. Malabar Cement, 0.42Mt/yr.

132. Mancherial Cement, 0.3Mt/yr.

133. Managalam Cement, 1Mt/yr.134. Megha Technical & Engineers, 0.5Mt/yr.

135. Meghalaya Cements Limited, 0.5Mt/yr

136. Murli Industries, 3.0Mt/yr.

137. My Home Industries, 3.2Mt/yr.

138. My Home Industries, 2.0Mt/yr (Grinding).

139. NCL Industries, 1.0Mt/yr. (Grinding).

140. NCL Industries, 2.0Mt/yr.

141. OCL India, 1.4Mt/yr. (Grinding).

142. OCL India, 4.0Mt/yr.

143. Orient Cement, 3.0Mt/yr.

144. Orient Cement, 2.0Mt/yr. (Grinding).

145. Panyam Cement & Minerals, 1.4Mt/yr.

146. Parasakti Cement Industries,1.7Mt/yr.

147. Penna Cement Industries, 2.0Mt /yr.

148. Penna Cement Industries, 1.2Mt /yr.149. Penna Cement Industries, 1.8Mt/yr.

150. Penna Cement Industries, 2.0Mt/yr.

151. Prism Cement, 6.1Mt/yr.

152. Rain Cements, 2.2Mt/yr.

81,129


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INDIA


6,40

21,24,33

21,90

26,93,160

17,53,55,184,193

39,4456,151

30,37,112,146,167

31,68,138,

139,173

99,113,125

121

172

166

190

118

126142 119

120

111

187

141

13,46

96

181176

20

105

5

2753

91

74

95

35

28

48

87

86

1

4,11

47,49

15,29,54,69,75110,134,135

2

72

85,94

88,92

50,51

45,196

22,58

76

Bangladesh

Nepal

Myanm

ar

Kolkata

250km

China

China

Bhutan

China

Bay o

Bengal

153. Rain Cements, 1.0Mt/yr.

154. Sagar Cements, 2.7Mt/yr.

155. Sanghi Industries, 3.0Mt/yr.

156. Saurashtra Cement, 1.5Mt/yr.

157. Shree Cement, 3.0Mt/yr

158. Shree Cement, 1.50Mt/yr. (Grinding).



161. Shree Cement, 3.0Mt/yr.

162.Shree Cement, 1.2Mt/yr. (Grinding).

163. Shree Digvijay Cement, 1.3Mt/yr.164. Sparta Cements & Inra, 1.0Mt/yr.

165. Sree Jayajothi Cements, 3.2Mt/yr.

166. Sri Chakra Cements, 0.3Mt/yr. (Grinding).

167. Sri Chakra Cements, 0.7Mt/yr.

168. Sri Lalita Cement Industries, 1.0Mt/yr.

169. Tamilnadu Cements Corp, 0.4Mt/yr.

170. Tamilnadu Cements Corp, 0.5Mt/yr.

171. Tata Chemicals, 0.44Mt/yr.

172. Toshali Cement, 0.24Mt/yr.

173. Toshali Cement, 0.15Mt/yr. (Grinding).

174. Trinetra Cement Limited, 1.8Mt/yr.

175. Ultratech Cement, 5.0Mt/yr.



178. Ultratech Cement, 1.1Mt/yr. (Grinding).


180. Ultratech Cement, 1.8Mt/yr. (Grinding).181. Ultratech Cement, 1.3Mt/yr. (Grinding).
















197. Ultratech Cement, 0.6Mt/yr.198. Vicat Sagar Cement, 2.8Mt/yr.

199. Zuari Cement, 1.0Mt/yr. (Grinding).

200. Zuari Cement,1.4Mt/yr.

201. Zuari Cement, 3.80Mt/yr.

GDP (PPP) (2011)1 US$4.42bn

GDP/capita (2011 est.)1 US$3700

Population (July 2012)1 1205.1m

Area1 3,287,263km2

Integrated plants5 146

Integrated capacity5 302Mt/yr

Grinding plants5 55

Grinding capacity5 63.5Mt/yr

TOTAL CAPACITY5 365.5Mt/yr

Cement industry - Consumption by use

Between 2006 and 2011 inclusive cement consump-

tion in India was dominated by residential real-estate

construction to the tune o 63%.6 Te second largest

type o use over the period was inrastructure, which

accounted or 20% o all cement used, ollowed by

commercial real-estate construction (13%) and indus-

trial construction (4%).

Left - Figure 4: Map o India

with major cities, cement

acilities and neighbouring

territories and

areas o water. 5

Left - Figure 5: Breakdown

o cement use by sector

or 2006 - 2011.6Residential

63%

Industrial

4%

13%

Commercial

Infrastructure

20%


5/8

Cement industry - Events in 2012 8-9

Te Indian cement industry grew by 4.4% in 20118

and throughout 2012 signicant cement capacity

continued to come on stream in India.Numerous new

projects were announced or mooted throughout the

year, despite January 2012 reports that the industry

was operating at as low as 65% o capacity.9 At the time

cement companyies blamed a decrease in government

inrastructure spending in major cities.

In February 2012 Fitch Ratings announced that

it had downgraded its outlook or the Indian cement

industry to negative, with a growth orecast o 2-5%

in 2012. While large by the standards o some cement

industries around the world, such a level would rep-

resent disappointment relative to recent

growth rates in India. Despite this, the

same month JK Cements announced

plans to double its capacity to 9Mt/yr by

31 March 2013. It expects another new

plant to commission by autumn 2013.

Also in February 2012, DalmiaCement Bharat Ltd expanded by pur-

chasing a 50% stake in Calcom Cement

India, a local producer in Assam that

commissioned later that year. Addi-

tionally, German-based vertical roller

mill producer Loesche GmbH held its

rst Round able in India between 28

February 2012 and 1 March 2012.

In March 2012 various Indian ce-

ment producers were able to report

improved nancial perormances or the three months

to the end o 2011, among them ACC, JK LakshmiCement, Kakatiya Cement Sugar & Industries, Chet-

tinad Cement and Ambuja Cement. Several producers

identied higher selling prices as a driver or improved

revenues and hence prots but were also keen to point

out that uel costs were on an upward trend, a theme

that would become common through the rest o 2012.

Chettinad Cement announced the imminent

commissioning o its new US$184m, 2.5Mt/yr plant

in Karnataka at the start o March 2012 and also an-

nounced a US$305m expansion in Andhra Pradesh

as part o plans to expand its capacity to 7.5Mt/yr in

both states.

April 2012 saw the announcement o the Indian

Union Budget or 2012-2013. Tis was seen by many

at the time as a mixed bag or cement producers,

promising increased inrastructure spending but also

increased taxes and taris on cement that would in-

crease consumer prices. Coupled to increases in rail

reight costs, that came into eect on 6 March 2012,

the budget was seen as broadly neutral rom the per-

spective o cement.

Also in April 2012 the Cement Manuacturers

Association (CMA) called or urgent action to reduce

the aorementioned rail costs. It warned that prices to

consumers would rise i the rates or reight were not

eased, which could, in turn, dampen demand.

ACC inormed the industry that it intended to

increase its capacity by setting up a 4Mt/yr cement

plant at Jamul in Chattisgarh as well as grinding units

at Sindri and Kharagpur. It announced the planned

closure o its existing Jamul plant at the same time.Laarge also announced its intention to purchase ur-

ther Indian assets in the uture, although it did not

speciy any targets at the time.

A number o rst quarter results were reported

by the industry in May 2012. ACC saw an increase o

19% in its income, Ultratech saw a 19% improvement

in prot due to higher sales but Ambuja Cements re-

ported a all in its net prot despite higher sales.

May saw a warning that despatches in India could

decline over the middle part o 2012, according to the

Cement Stockists and Dealers Association o Bombay.

It warned that power and reight costs could rise by

as much as 13% through the remainder o the year.

Te month also saw a ne in Himachal Pradesh or

Jaiprakash Associates or environmental violations.

INDIA


Below: Construction o the

My Home Industries cement

plant at Mulakalapalli, Andhra

Pradesh started in 2009. It

eatures a state-o-the-art

vertical roller mill rom

Loesche or the manuacture

o blended cements.Source: P Sreedhar, entrant

in the 2013 Global Cement

Photography Competition.

-20

-15

-10

-5

0

5

10

15

Dec2011

Jan2012

Feb2012

Mar2012

Apr2012

May2012

Jun2012

Jul2012

Aug2012

Sep2012

Oct2012

20

Month-on-monthch

ange(%)

AllIndiacementprice

(INR/50kg)

240

250

260

270

280

290

300

310Right - Figure 6: Cement

prices in India in Indian

Rupees, December 2011 to

October 2012 and month-on-

month change (%).10 Prices

rose signicantly relativeto 2011 during the rst 10

months o 2012.

INR 1 = US$0.0186

US$1 = INR53.65

(Conversion accurate as at

26 January 2013)

Mean price o 50kg bag over

period o graph:

INR288 = US$5.36.


6/8

INDIA


Further mixed nancial reports came in in June

2012, with Shree Cement reporting a 74% increase in

net prot, much o which it attributed to better use

o its capacity as well as expanded capacity. However,

the company warned that its 30% production in-

crease, rom 25.7Mt to 33.5Mt in the 12 months to 31

March 2012, would be very hard to repeat in the 2013

scal year. June 2012 also saw in principle agreements

or JK Cement and Shivashankar Minerals to build

plants in two separate states.

Cement industry - US$1.1bn fne rom CCI

With relatively high barriers to entry, captive custom-

ers, relatively little product dierentiation and no

materials that can properly substitute or cement, the

industry is inherently prone to low competition. Tis

can lead to cartel-like practices or ull-blown collusion

between rival producers.

With this in mind, the most signicant news or

the Indian cement industry in 2012 also came in June,

when 11 cement manuacturing companies werened a collective US$1.1bn or alleged price-xing

by the Competition Commission o India (CCI).11

In one o the largest ever nes o its kind, the author-

ity named ACC and Ambuja Cements, Ultratech

Cement, Jaiprakash Associates, India Cements,

Madras Cements and the local unit o Frances Laarge

among 11 major producers.

Te commission has ound that the cement com-

panies have not utilised the available capacity, so as

to reduce supplies and raise prices in times o higher

demand, said the CCI in its judgement at the time. It

said that the penalty on each company would amountto 50% o their prot or the nancial years 2009-10

and 2010-11, although each company has so ar main-

tained that it was not guilty o any unair practice.

ACC was ned US$201m and Ambuja was told

to pay US$204m. Indias largest producer, Ultratech

Cement, has to pay US$206m, while Laarges Indian

unit will have to shell out US$84m. Jaiprakash Associ-

ates has been ned US$232m.

On 21 June 2012 the CCI said that the cement

companies action o limiting supplies to the market

through an anti-competitive agreement was not

only detrimental to consumers but also to the econ-

omy, as the building material is a critical input or

inrastructure projects. Te regulator asked the com-

panies to pay the ne within 90 days. However, the

companies challenged the regulators orders in the

Competition Appellate ribunal, a quasi-judicial body

and can appeal to Indias Supreme Court.

In response to the initial complaints, Ultratech said

that it had not indulged in any cartelisation. In Zurich

Holcim said that it would, Contest the allegations and

ndings against (ACC and Ambuja) in the order and

will pursue all available legal steps to deend their re-

spective positions.

In Paris Laarge said, We will see the detailed re-

port and decide the suitable actions to take. Laarge

has a strict policy to comply with competition laws.

Cement industry - More expansion9

Even as the CCI ruling was made, cement companies

continued to announce development plans or new

capacity in India, the consequence o a constant desire

by cement company boards to maintain a companys

market share in a market with increasing demand.

In June and July 2012, India Cements was given the

environmental go-ahead to expand at two sites, Murli

Industries was investigating sites or a 3Mt/yr plant

in Karnataka and Ultratech secured a limestone mine

expansion in Gujarat. ACC was reportedly talking

about a US$900m, 5Mt/yr clinker-making complex

in Andhra Pradesh with a total cement capacityo 8Mt/yr!

By August 2012, the Indian government attempted

to get in on the industrys expansion by restarting the

sale o six cement plants that had previously been

closed by the Cement Corporation o India over 10

years beore. Advertised as ready-made capacity the

sale has not yet attracted any bidders as ar as Global

Cementcan ascertain, presumably due to the relative

age o the plants and commitments

to new capacity by the major play-

ers. Projects announced at the same

time included two plants being

planned by Emmami Cement and

ABGs announcement o two new

plants or 2014.

However, it was becoming clear

come August, 2012 that uel was

playing an increasingly important

role in plant protability. Birla

Corp. said that higher coal and

reight prices caused a 24% drop

in protability year-on-year in the

quarter ending 30 June 2012 and

Ultratech was threatened with a loss

o coal reserves by Coal India.Te uel situation worsened

in September and October 2012

as diesel price rises urther

Below: Ultratech CementsAditya Cement Works

in Rajasthan.

Source: Rajesh Kumar,

entrant in the 2012

Global Cement

Photography Competition.


7/8

INDIA


contributed to a sudden 15% reight cost increase by

the All India Motor ransport Congress. Cement pro-

ducers claimed that they would be unable to absorb

the increases, which, or many, aected raw material

movement and coal supplies as well as distribution.

At the same time three cement companies lost al-

located coal reserves afer an inter-ministerial panel

recommended cancellation o a number o blocks.

ACC also came under re rom locals near to its plant

in Orissa, when they accused it o mismanagement o

its y-ash stocks.Good news in the autumn came rom Shree

Cement, which continued with its run o sky-high

prot increases, this time an unlikely-to-be-repeated

539% year-on-year increase. Shree did not com-

ment on the cause o the disparity but it is thought

likely that the year-ago period eatured a large non-

operating cost.

Ultratech restated its intent to enlarge its cement

capacity in September 2012, with the announcement

that it aimed to hit 62Mt/yr by April 2013. Ultratech

chairman Kumar Mangalam Birla acknowleged that

the short-term sector remained challenging. At the

time Ultratech was in talks with debt-laden Jaiprakash

Associates regarding the acquisition o the latters

plants in west and southern India.

A plethora o Indian cement results in the October

and November 2012 issues oGlobal Cement Magazine

showed a mixture o prots and losses. Mangalam

Cement saw a 135% improvement in its net prot, al-

beit to just US$4.9m, whereas Anjani Portland Cement

reported a 62% year-on-year drop or the quarter end-

ing 30 June 2012. HeidelbergCement India reported a

turn around rom a loss in 2011 to a prot in 2012,

as did Everest Industries, which produces a variety o

cement-based materials.Te results contined in the third quarter o 2012,

with Ambuja Cement reporting a 77% year-on-

year improvement in its net prot or the quarter.

Ultratech Cements prot nearly doubled

over the same timerame, afer it recorded

a strong pick-up in demand.

Meanwhile Shree Cement was putting

its money where its mouth was by order-

ing a number o vertical roller mills rom

Germanys Gebr. Peier. Te mills will

be installed at the companys Rajasthan

plant as part o an eighth production line

at the acility. November 2012 also saw a

cement dealers strike in Kerala.

In December 2012 India Cements

reported on plans to expand one o its

plants in amilnadu with a 3Mt/yr ad-

dition. In Bengal, Ultratech and ACC

received permits to proceed with in-

vestments at Hooghly and Kharagpur

respectively. JK Lakshmi announced

plans to invest US$365m in its expan-

sion plans and announced that work on

its Durg, Chhattisgarh, plant would startin early 2013. JSW Cement announced

the commissioning o more grinding capacity or

March 2013.

Financial reports saw Jaiprakash Associates cement

interests save an otherwise poor perormance or the

quarter to 30 September 2012 and Mangalam Cement

reported a net prot o US$5.2m or same period.

So ar in 2013 the busy Indian cement industry

shows ew signs o slowing down. Irelands CRH has

been linked to Shree Jayajothi Cements and it was re-

ported that McNally Bharat had won its rst ever EPC

contract in the cement sector rom ACC.

Cement industry - Future orecasts

Given the rampant growth o the Indian cement in-

dustry, ew are betting against continued capacity

additions in the short- to medium-term. Te extent

o capacity addition, however, and whether or not de-

mand will rise to match it more closely than at present,

is up or debate.

In November 2012 the India Brand Equity Founda-

tion (IBEF) said that it expected double-digit growth

in the cement industry or the 2013 and 2014 scal

years, which end on 31 March 2013 and 31 March

2014 respectively.12 It reported that the cement indus-

try would increase production by around 71Mt/yr over

the same time-rame to reach over 300Mt/yr in 2014.

Meanwhile, the Indian Governments 12th

Five-Year Plan, which runs or 2013 to 2017, states that

India will require a cement capacity in the region o

480Mt/yr by the end o 2017.12 It states that a urther

150Mt/yr o capacity will be required to accomplish

this. Separately, ACC expects India to have a capacity

o 500Mt/yr by 2020.13

Tis represents more than twice the cement that

India currently consumes in a year and so it is worth

asking, i this capacity is reached, what will the ca-pacity utilisation rate be? Te government promises

signicant investment in inrastructure, although bu-

reaucracy has hampered such investments in the past.

Above: IBAU Hamburg

delivered a road-mobile

ship unloader to Sanghi Indus-

tries or its Mumbai Cement

Terminal in 2012.


8/8

Land acquisition is a big issue, said H

M Bangur, chairman and managing direc-

tor o north-based Shree Cement, in August

2012. No state government is providing

land to set up units. Greeneld expansion

is tough.

Sunil Singhania, equity head at Reliance

Mutual Fund, said, Capacity creation in

India is very dicult because there is no

land (in some places) and no limestone de-

posits at others. Several cement companies

have written down assets. I believe capac-

ity additions going orward will not be as

aggressive as in the past. Expansion will be

slower than demand growth.

With prices remaining low due to overcapacity and

low demand, the potential or uture collusion between

producers and the diculty o setting up new capacity,

it is possible that producers, under pressure to meet

the expectations placed on them by the Five-Year Plan,

will see increased pressure on margins in the next ewyears, especially i uel prices continue to rise.

In the midst o this, smaller companies are likely

to suer more than most, possibly making them ac-

quisition targets or better-equipped multinationals.

Indeed, in January 2013 Prism Cement, one o Indias

smaller cement producers, actually reported a net

loss or the quarter to 31 December 2012.14 It cited

low demand, high uel costs and increased electricity

prices. How long can such producers continue as the

Ultratechs, ACCs and Ambujas o this world keep add-

ing new capacity?

An academic report carried out or the CompetitionCommision o India in 2012 hints at this possibility o

uture consolidation in the industry.6 Te study ound

that, despite capacity utilisation alling across all ce-

ment producers in India rom 2006 to 2011, it was

those with the smallest market share that experienced

by ar the worst reduction. Binani Cement, or exam-

ple, recorded utilisation rates o only around 55-60%.

Conversely mega-players like Ultratech have been

more stable, with rates o 80-95%. In January 2013

India Ratings reported that smaller businesses were

less likely to benet rom the expected improvement

in the industry.15

A major reason behind this phenomenon is rising

uel costs, which have hit producers rom two direc-

tions in the past year. Firstly, demand or power in

India is high and domestic uels are dedicated predom-

inantly to electrical generation. Industrial companies

are orced, in many cases, to import costly oreign uel,

which must be shipped inland to be used. A second

eect o increased uel prices is that cement is more

costly to tranport once it has lef the actory.

Due to their size allowing greater economies o

scale, larger cement companies are better positioned

to import uel on a large scale and are more likely to

have exible vehicle eets to respond as demand uc-tuates in dierent areas. Another crucial dierence

between the larger and smaller companies is that larger

players are more likely to have a pan-Indian presence.

Tis enables them to ride-out periods o diculty in

one area while maximising margins elsewhere. Local

producers do not have this luxury. Tey do not even

have the option to move into supplying bagged cement

because 98% o cement in India is sold in bags.13

Smaller local producers are less well equipped to

deal with expansion and their relative size will gradu-ally diminish compared to the top 12 producers. As

this happens, it is likely that they will become the ac-

quisition targets o the larger rms.

Cement industry - Conclusion

Te Indian cement industry is large, growing and,

with consumption o just 185kg/capita/yr in 201113

(compared to global average o ~300kg/capita/yr) the

country itsel has the capacity to demand signicantly

more cement as it develops.

However, the industry is at a tricky point in its

development. Capacity is way ahead o actual con-sumption yet producers, keen to not be lef behind,

expand to secure uture demand. Producers in this

situation should bear in mind the Indian cement

industry o the early 20th Century, when companies

expanded, lowered prices and, in many cases, went out

o business. Some have cautioned against rapid capac-

ity addition in the coming years.16

It is oreseeable that the Indian cement industry

will see consolidation over the coming years. Produc-

ers that can dierentiate their cement rom others or

can make savings on production costs by, or example,

using alternative uels, will be able to take advantage

o increasing demand while remaining ahead o

their competitors.

Reerences

1. CIA World Factbook, India, https://www.cia.gov/library/publica-

tions/the-world-actbook/geos/in.html.

2. World Bank Indicators website, GDP per capita (current US$),

http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

3. United States Geological Survey, Various Reports, http://minerals.

usgs.gov/minerals/pubs/country/asia.html#in.

4. Cement Manuacturers Association website, Historical Develop-

ment,http://www.cmaindia.org/portal/static/DynamicHistory.aspx

5.Global Cement Directory 2013,PRo Publications International Ltd.,Epsom, UK, November 2012.

6-16. See online article, http://www.globalcement.com/articles.

INDIA


6065

70

75

80

85

90

95

100

Amountocement(Mt)

200

250

300

350

400

150

2011

2012

2013

2014

2015

2016

50

55

Capacityutilisationrate(%)

Left - Figure 7: An ACC report

orecasts increasing capacity

(red), production (blue) and

capacity utilisation (green) in

2013 - 2016.13

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