cement 2013 marchmarket overview and trends → andhra pradesh has the highest installed capacity in...
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Cement
For updated information, please visit www.ibef.org
MARCH
2013
2 2
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
3 3
Cement
For updated information, please visit www.ibef.org ADVANTAGE INDIA
Advantage India
Opportunities
Structural drivers
Strong demand Long-term potential
Advantage India
• Robust infrastructure growth during 12th Five year plan to drive growth
• Initiatives taken by GOI to promote cement exports will further boost demand
• Oligopoly market, where large players have partial pricing control
• Low threat from substitutes
• Increasing presence of Tier II cement players
• Use of alternate fuels to lower production costs and emissions
• The North East, which is witnessing a construction boom, offers attractive investment opportunities
• Large planned investments in infrastructure and housing is likely to boost demand for cement in the coming years as well
Market size:
550 mtpa
FY20F
Market size:
223.4 mtpa
FY12
Source: Edelweiss Notes: 2013F - Forecasted market size for 2013,
MTPA - Million Tonnes Per Annum
MARCH
2013
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Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
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Cement
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS
Overview of the Indian cement industry
Cement industry (FY11)
Large cement plants Mini and white cement plants
• Cement plants: 183
• Installed capacity: 234.3 mtpa • Cement production: 168.3 mtpa
• Cement plants: 365
• Installed capacity: 11.1 mtpa
• Cement production: 6.0 mtpa
Key statistics
• India is the world’s second largest cement producer after China
• Total turnover of the Indian cement industry is estimated at USD25 billion in FY11
• Major players contributed about 97 per cent to the installed capacity during FY11
Source: Cement Manufacturers’ Association (CMA),Planning Commission, Aranca Research
Note: MTPA - Million Tonnes Per Annum, Data are for FY11
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2013
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Key industry dynamics
→ Although India is one of the largest cement markets in the world, per capita consumption of cement is just around 156 kg, which is low in comparison to the global average consumption of about 356 kg
→ Demand for cement in India is cyclical; barring short-term disruptions, it grows largely in tandem with economic growth
Per capita cement consumption in 2009 (kg)
0 200 400 600 800 1000 1200 1400
China
EU
World
Japan
Asia (ex-China)
US
India
Source: Indiabulls, Aranca Research
Trend in GDP and growth in cement demand
Source: Ambit Capital, Aranca Research Note: GDP - Gross Domestic Product
MARKET OVERVIEW AND TRENDS
MARCH
2013
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Source: Department of Industrial Policy and Promotion, Aranca Research
Notes: MT - Million Tonnes, E - estimate
→ The Indian cement industry is the second largest producer in the world comprising of 183 large cement plants and 365 mini cement plants
→ The production of cement increased at a CAGR of 10.0
per cent over FY07-11
→ Production is expected to reach 247 MT in FY12 as per the 11th Five Year Plan
Production of cement (MT)
MARKET OVERVIEW AND TRENDS
156 168 182
207 228
247
0
50
100
150
200
250
300
FY07 FY08 FY09 FY10 FY11 FY12E
Cement production in India has been growing at a fast pace
MARCH
2013
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Cement
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Installed capacity (2011) Key markets
Cement industry
North
South
East
West
66.4 mtpa
126.9 mtpa
43.5 mtpa
44.1 mtpa
Central 37.3 mtpa
Rajasthan, Punjab, Haryana and the NCR
Tamil Nadu, Andhra Pradesh and Karnataka
West Bengal, Chhattisgarh, Orissa and
Jharkhand
Maharashtra and Gujarat
Uttar Pradesh, Madhya Pradesh
MARKET OVERVIEW AND TRENDS
Source: Department of Industrial Policy and Promotion, Aranca Research Note: MTPA - Million Tonnes Per Annum
The industry is split into five geographic segments
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2013
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Shares in total capacity in northern region (2011)
MARKET OVERVIEW AND TRENDS
66.5%
14.2%
7.2%
6.0% 4.5%
0.8% 0.8%
Rajasthan
Himachal Pradesh
Punjab
Uttarakhand
Haryana
Jammu & Kashmir
Delhi
0.5%
7.5%
2.3%
19.5%
20.8% 16.8%
32.6%
Assam
Meghalaya
Bihar
Jharkhand
Orissa
West Bengal
Chhattisgard
Shares in total capacity in eastern region (2011)
→ Rajasthan has the highest installed capacity in north India, accounting for a 66.5 per cent share in capacity in the region in 2011
→ Chhattisgarh leads the eastern region with a share of 32.6 per cent of total installed capacity in the region in 2011
Source: Department of Industrial Policy and Promotion, Aranca Research Note: MTPA - Million Tonnes Per Annum
Geographic distribution of installed capacity in India … (1/2)
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Shares in total capacity in southern region
MARKET OVERVIEW AND TRENDS
→ Andhra Pradesh has the highest installed capacity in the southern region (53.5 per cent share of total installed capacity)
→ Madhya Pradesh leads the central region in installed capacity while Gujarat leads the pack in west India
53.5%
28.0%
18.0%
0.5%
Andhra Pradesh Tamil Nadu Karnataka Kerala
Shares in total capacity in central region
34.4%
65.6%
Uttar Pradesh Madhya Pradesh
55.0%
45.0%
Gujarat Maharashtra
Shares in total capacity in western region
Source: Department of Industrial Policy and Promotion, Aranca Research Note: MTPA - Million Tonnes Per Annum
(2011) (2011) (2011)
Geographic distribution of installed capacity in India … (2/2)
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The eastern and central regions have high demand growth
Region-wise domestic consumption of cement (mtpa)
33.6 35.1 38.3 40.8
45.6 51.0
FY08 FY09 FY10 FY11F FY12F FY13F
North
48.6 53.8 55.5 56.4
62.1 68.9
FY08 FY09 FY10 FY11F FY12F FY13F
South
24.7 28.0
33.0 37.3
41.7 46.6
FY08 FY09 FY10 FY11F FY12F FY13F
East
32.7 34.5 38.8 41.4
45.4 49.8
FY08 FY09 FY10 FY11F FY12F FY13F
West
23.8 26.2 30.8
34.3 38.2
42.0
FY08 FY09 FY10 FY11F FY12F FY13F
Central
163.4 177.5
196.4 210.2
236.3
265.9
FY08 FY09 FY10 FY11F FY12F FY13F
All India
CAGR 9%
CAGR 7% CAGR
14%
CAGR 9% CAGR
12%
CAGR 10%
Source: CMA, Edelweiss, Aranca Research; Note: MTPA - Million Tonnes Per Annum
MARKET OVERVIEW AND TRENDS
MARCH
2013
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Market concentration is high across regions … (1/2)
Market share by installed capacity (2011)
Source: Department of Industrial Policy and Promotion, Aranca Research
MARKET OVERVIEW AND TRENDS
North
East
14.2%
6.2%
12.1%
9.8%
5.5%
52.1%
Lafarge India
ACC
Ultratech
OCL India Ltd
Ambuja Cement
Others
South
29%
17%
14%
14%
11%
7% 6% 2%
Ambuja Cement
Shree Cement
Others
Ultratech Cement
J K Cement
ACC
Jaypee Cement
Birla Cement
10.2%
5.9%
9.9%
8.3%
7.1%
8.0%
50.6%
India Cement
Madras Cement
Ultratech Cement
Chettinad Cement
Dalmia Cement
ACC
Others
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2013
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Market concentration is high across regions … (2/2)
Market share by installed capacity (2011)
MARKET OVERVIEW AND TRENDS
West Central
All - India
Source: Department of Industrial Policy and Promotion, Aranca Research
29.0%
10.9%
12.5%
47.6%
Ultratech Cement
Jaypee Cement
Ambuja Cement
Others
33.5%
12.3% 12.1%
42.1%
Jaypee Cement
Ultratech Cement
ACC
Others
10.0%
7.5%
15.0%
1.4% 66.1%
Ambuja Cement
ACC
Ultratech Cement
Jaypee Cement
Others
MARCH
2013
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Notable trends in the cement industry
Increasing presence of small and mid-
size cement players
• Presence of small and mid-size cement players across regions is increasing, which helps to diminish market concentration of industry leaders
• Small and mid-size players have been constantly increasing their installed capacity to cater to increasing cement demand
Cost reduction through the use of alternate fuels **
• Major cement manufacturers in India are increasingly using alternate fuels, especially bioenergy, to fire their kilns
• This is not only helping to reduce production costs of cement companies, but is also proving effective in reducing emissions
Increasing sale of blended cement
• The proportionate sales of blended varieties of cement - Portland Pozzolana Cement (PPC) and Portland Blast Furnace Slag Cement (PBFC) - has risen over the years
• During 2011, blended cement accounted for 75 per cent of total cement production in the country
Source: Department of Industrial Policy and Promotion, Aranca Research Notes: ** - The Success Stories section includes cases of successful employment
of alternate fuels in cement production to reduce production costs
MARKET OVERVIEW AND TRENDS
MARCH
2013
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Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
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Cement
For updated information, please visit www.ibef.org GROWTH DRIVERS
Conducive industry forces support long-term attractiveness
Market
attractiveness
Positive
Neutral
Postive
Positive
Positive
• High - Huge capital investments required present substantial barriers to entry and achieving economies of scale
• Moderate - Cement players have to depend on the railways for carriage outward and local coal companies for fuel, although diversification of freight options and fuel sources is diminishing the suppliers’ power
• Low - Substantial market concentration among large players ensures low bargaining power of buyers
• Low - Cement, practically, has no substitutes
• Low - The Indian cement market is oligopolistic in nature, characterised by tacit collusion, where large players partially control supply for better price discipline
Source: Aranca Research
MARCH
2013
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Source: Cushman & Wakefield, Aranca Research
GROWTH DRIVERS
• The Housing segment accounts for a major portion of the total domestic demand for cement in India
• Between 2010 and 2014, demand for housing units is estimated to be 4.3 million, leading to a higher demand for cement for homebuilding
• Growing urbanisation, an increasing number of households and higher employment are primarily driving the demand for housing
• Initiatives by the government are expected to provide an impetus to construction activity in rural and semi-urban areas through large infrastructure and housing development projects
Housing growth Infrastructure growth Commercial real estate growth
• The government is strongly focused on infrastructure development to boost economic growth
• It plans to increase investment in infrastructure to USD1 trillion in the 12th Five Year Plan (2012-17), compared with USD514 billion under the 11th Five Year Plan (2007-12)
• Infrastructure projects such as Dedicated Freight Corridors as well as new and upgraded airports and ports are expected to further drive construction activity
• The government intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs
• The demand for Commercial Real Estate segments, comprising retail space, office space and hotels, as well as civic facilities including hospitals, multiplexes and schools, has been rising due to the growth in economy
• The demand for office space in India is being driven by the increasing number of multinational companies and the growth of the services sector
• Strong growth in tourism, including both business and leisure travel, has boosted the construction of hotels in the country
• Estimated demand by real estate segment between 2010 and 2014: Office (240 million sq ft), Retail (55 million sq ft), Hospitality (78 million room nights)
Strong demand drivers in the near term …
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2013
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… expected to boost capacity utilisation and profitability
Region-wise forecasted capacity utilisation levels of cement players (%)
82 84
88
FY11F FY12F FY13F
North
67 68
73
FY11F FY12F FY13F
South
81
87 91
FY11F FY12F FY13F
East
79 77
80
FY11F FY12F FY13F
West 90
85 87
FY11F FY12F FY13F
Central
78 77
82
FY11F FY12F FY13F
All India
Source: CMA, Kotak Institutional Equities, Aranca Research
GROWTH DRIVERS
MARCH
2013
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Additional capacity creation as per the 12th Five Year Plan
Source: CMA, Kotak Institutional Equities, Aranca Research Notes: Additional capacity creation estimates are based on
increase in base lines, roads, housing and fiscal support
GROWTH DRIVERS
12.9 13.4
25.3
30.2
35.5 38.7
FY12 FY13 FY14 FY15 FY16 FY17
→ Installed capacity increased at a CAGR of 13.6 per cent over FY06-11 while production witnessed an increase of 9.1 per cent during this period
→ Total capacity of 331 MT is estimated to have been created in FY12
→ The strong momentum in capacity addition is not
surprising given the sharp growth in construction, infrastructure and real estate in the Indian economy
→ It is hence not surprising that the 12th Five Year
Plan estimates additional capacity requirement to touch 139.7 MT by FY17
Expected movement in additional capacity requirement
MARCH
2013
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Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
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Cement
For updated information, please visit www.ibef.org SUCCESS STORIES: INNOVATIVE SOLUTIONS
Cases of successful use of alternate fuels in cement production
Madras Cement's Alathiyur plant
India Cements Ltd's Dalavoi plant
UltraTech's Gujarat Cement Works
Lafarge's Arasmeta plant
Strategy
Use bioenergy through burning of coffee husk and cashew nut shells
Use Low Sulphur Heavy Stock (LSHS) sludge as
alternate fuel
Use tyre chips and rubber dust as alternate
fuel
Substitute 10% of coal used in kilns with rice
husk
Benefits
Annual cost savings of USD1.7 million
Annual savings of USD6500 approx.
Reduction of about 30,000 tonnes of carbon emissions annually
Higher energy savings and lower carbon emissions
Company/Plant
Source: CMA, Aranca Research
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2013
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Source: Company website (www.grasim.com), Department of Industrial Policy and Promotion,
Aranca Research Notes: H1FY13 - Data mentioned is for first six
month of FY13, RMC - Ready-Mix Concrete
Revenue and Profit after Tax (PAT) in USD billion
UltraTech Cement
UltraTech is India's largest exporter of cement clinker spanning
export markets in countries across the Indian Ocean, Africa,
Europe and the Middle East. UltraTech and its subsidiaries
have a presence in five countries through 11 integrated plants,
one white cement plant, one clinkerisation plant, 15 grinding
units, two rail and three coastal terminals, and 101 RMC plants.
It has an annual capacity of 52 MT
Projects: Mumbai Metro, Bangalore Metro Rail, Kolkata Metro
Rail, Monorail, Coastal Gujarat Power, Elevated Express
Highway, PimpalGaon-Nashik-Gonde Road, Bandra-Worli Sea
Link
• Milestones
• 2004 - Acquisition of L&T’s Cement Business: UltraTech Cement Ltd.
• 2006 - Narmada Cement Company Limited amalgamated with UltraTech
• 2010 - Samruddhi Cement Limited amalgamated with UltraTech Cement Limited
• 2012 - Acquisition of Adhunik Cement’s Meghalaya plant
Cement
1.0 1.2 1.4 1.5
2.9
4.0
2.0
0.16 0.21 0.23 0.20 0.35 0.50 0.28
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
FY07 FY08 FY09 FY10 FY11 FY12 H1FY13
Revenue PAT
UltraTech Cement: A compelling growth story
SUCCESS STORIES: INNOVATIVE SOLUTIONS
MARCH
2013
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Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
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Cement
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North East India: A land of opportunities for cement firms
NE India: Cement demand
• The North East (NE) region has consistently been a cement deficit region over several years
• At present, cement demand in the NE is about 5.2 mtpa
NE India: Cement supply
• Cement manufactured locally is inadequate to meet the local demand for cement
• The deficit is met through cement purchased from other parts of India
• High transportation costs cause the landed costs of cement to increase considerably
NE India: Cement demand-supply gap
5.2
3.0
Estimated demand Available supply
Deficit of 2.2 mtpa
Source: Industry sources, Aranca Research Note: MTPA - Million Tonnes Per Annum
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2013
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Source: North East Vision 2020 document, Aranca Research
→ The Government has approved a package of fiscal incentives and other concessions for the North East Region, namely the North East Industrial and Investment Policy, 2007, effective from 1 April, 2007
→ The major policy and fiscal initiatives are expected to catalyze infrastructure and industrial development in the region, spurring the demand for cement
NE states projected GDP growth at constant prices
10.0%
13.7%
16.4%
XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
NE states projected per capita income growth
8.6%
12.4%
15.2%
XI 5-yr Plan XII 5-yr Plan XIII 5-yr Plan
OPPORTUNITIES
North East India: Demand drivers for cement
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Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Innovative solutions
Opportunities
Useful information
For updated information, please visit www.ibef.org
Cement MARCH
2013
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Cement
For updated information, please visit www.ibef.org USEFUL INFORMATION
Industry associations
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
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2013
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Cement
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Bodies promoting industry development
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 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
USEFUL INFORMATION
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2013
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Cement
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Glossary
→ CMA: Cement Manufacturers' Association
→ GDP: Gross Domestic Product
→ GoI: Government of India
→ INR: Indian Rupee
→ MTPA: Million tonnes per annum
→ NE India: North East India
→ FY: Indian financial year (April to March) → So FY10 implies April 2009 to March 2010
→ USD: US Dollar
→ Conversion rate used: USD1= INR48
→ Wherever applicable, numbers have been rounded off to the nearest whole number
USEFUL INFORMATION
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Disclaimer
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