Description
Market insights:
Domestic cement production was recorded at 334.48 Mn tons in FY 2020 as compared to
337.32 Mn tons in FY 2019, a fall of 0.84% year-on-year, mainly due to the economic slowdown in FY 2020. Cement production is expected to reach 304.97 Mn tons by the end of FY 2025, expanding at a compound annual growth rate (CAGR) of 4.69% during the FY 2021-FY 2025 period. The southern part of India holds the highest market share (~35%) of the Indian cement industry, in terms of installed production capacity.
The capacity utilization rate has declined from 70% in FY 2019 to 61% in FY 2020 on account of excessive rain in many parts of the country and temporary closure of cement plants during the government-enforced lockdown.
Prolonged rain in many parts of the country and the temporary closure of cement plants during the government enforced lockdown have led to the capacity utilization rate to fall from 70% in FY 2019 to 61% in FY 2020.
The major players operating in the Indian cement industry include UltraTech Cement Limited, Ambuja Cements Limited, JK Lakshmi Cement, and Ramco Cements Limited.
Impact of COVID-19:
The nationwide lockdown in the wake of the pandemic took an unprecedented toll on the cement industry in India. With the outbreak of the COVID-19 pandemic and the lockdown that followed, the cement industry in India suffered an unprecedented blow. The demand for cement declined to ~3.5% in FY 2020 from 9.5% in FY 2019. This was only the second instance of such a sharp decline in the last 15 years, after the demonetization in FY 2017. The downturn ofSlump in the real estate market, including the IHB (individual houses and buildings) housing segment in the country, has negatively impacted affected the cement industry in the country. The weakened demand from the consuming industries has resulted in reduced capacity utilization of the cement sector. ACC Limited’s consolidated net profit declined by 6.6% year-on-year, while its net sales declined by 11% in the last quarter of FY 2020 due to disruptions in business
As a result of the impact of COVID-19 related business disruptions, ACC Limited’s consolidated net profit declined by 6.6% year-on-year, while its net sales declined by 11% in the last quarter of FY 2020.
Market segment insights:
Among the major Indian states, the southern states of Tamil Nadu, Andhra Pradesh, and Karnataka together accounted for the highest cement production installed capacity of (~35%) in FY 2020, followed by the northern states (Rajasthan, Punjab, and Haryana), which collectively accounted for ~20% of the total installed capacity.
Out of the different end- user industries of cement, the housing segment accounted for the highest demand in FY 2020. Within the housing segment this, ~38% demand was generated by the rural housing sector. Such high demand for cement from the housing sector may can be attributed to the fast execution of affordable government housing schemes like such as Pradhan Mantri Awas Yojna, and Housing for All by 2022. Apart from housing, commercial and industrial investments, the infrastructure segment accounted for considerable demand for cement in India.
Key growth drivers of the market:
To develop the country’s infrastructure, the Indian government has undertaken several projects related to the construction of roads and highways, both in the rural and urban areas, along with the development of industrial hubs in different parts of the country. These schemes and initiatives are together expected to drive the growth of the Indian cement industry, since it is one of the primary materials for the successful execution of such projects.
Essential minerals used for manufacturing cement, which include limestone (calcium), bauxite (aluminium), iron ore, and coal, are available in abundance in different parts of India. This has resulted in zero or low cost of import of raw materials for cement manufacturers, thus making cement businesses profitable in India. As a result, cement manufacturing has increased steadily, driving the supply side of the Indian cement industry over the years.
Companies covered
ACC Limited
Ambuja Cements Limited
J.K. Cement Limited
Jaiprakash Associate Limited – Jaypee Group
JK Lakshmi Cement Limited
Orient Cement
The Ramco Cements Limited
Shree Cement Limited
The India Cements Limited
UltraTech Cement Limited
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