Cement Industry Analysis PDF

CEMENT INDUSTRY
TEAM:
Ashish Mittal
Jsvm Gautam
Disha Parwani
Indrisha Basu
Rupayan Bhakta
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About Industry
India is the world's second largest cement producer,
accounting for over 8% of global installed capacity
India's cement production is projected growth at a

CAGR of 5.65% and consumption at 5.68%.
Cement clusters
Key government initiatives like urban infrastructure,

commercial real-estate, smart cities development
and housing for all have aided demand
Installed capacity : Production:

500 MTPA
298 MTPA
Power of
Porter's 5 forces
customers
Using the Porter's 5 forces, we try to measure the profitability of the industry Power of
suppliers
Competition substitute
products
New
entrants
Bargaining Power of Bargaining power of Threat of new Entrant Threat of substitute Extant Industry Rivalry
Supplier (Moderate) buyer (Low) (Low) (Low) (Moderate)
Most companies have captive Local Markets are dominated Entry in the industry requires a No product exists to date that Large companies enjoy
limestone reserves, leading to by small number of cement huge capex. can substitute cement economies of scale
low supplier power firms Limited raw material sources effectively. Only quantity can be As cement cannot be
Cement manufacturers have Retail customers account for and strict government varied transported across regions,
argues that price hikes bulk of customer base. But clearances restrict new Materials like timber, may be a competition is regional in nature
happen due to increase in retail buyers don't have much competition sustitute , but only for low-rise Given over-capacity, slowdown
prices of transportation and leverage in dictating the Large players benefit from buildings in demand weakens prices, so no
raw materials, indicating that pricing economies of scale Although steel might be a real pricing power
suppliers can change the Oligopolistic market further Distribution and marketing substitute for high-rise,
prices leaves consumers with near channels are difficult to regulations require the steel to
But companies often opt for to zero bargaining power replicate, restricting entry be encased in something
backward integration, Lack of substitute also causes Rising cost meaning low IRR concrete to avoid any fire hazard
weakening supplier power low bargaing power for new entrants
PESTLE Analysis
Political:
Coal rates, power tariff, railway freights play a major role in
price determination. Interestingly, government controls all
of these prices.
Incentives offered by state governments - Haryana has
Technology:
frozen electricity rates for the next five years, Gujarat
The government is discussing technology transfer in the field
provides exemption from electric duty.
of energy conservation and environment protection to help
improve efficiency of Indian cement industry.
Economic: Most technological developments around sustainability and
Future of cement industry is very strong. A lot of going green
government infrastructure and housing projects are under
construction
Rising incomes and the reduction in interest rates on
Environmental:
housing loans increasing the affordability of new houses.
National Council for Cement and Building Materials(NCB)
investigating feasibility of using waste materials from
Social: different industries in cement manufacture
Indian customers prefer buying branded cement. This Energy Savings Certificates (ESCerts) issued to greenest
industry will create 25 lakh jobs in coming years industries under PAT scheme
Cement industry estimated to generate ~30 lakh jobs in
next 4-5 years
Increase in demand for affordable housing in Tier-II and
Tier-III cities due to increased WFH – cement demand up
Industry Structure
Supply Chain: The most important raw material is Limestone and all the manufacturing units are concentrated around the limestone
quarries. It is a highly automated industry which relies on huge economies of scales to sustain its operations. Since it is a concentrated
manufacturing setup, the distribution across regions is a major challenge in the supply chain. The same consumes approximately 25% of
the total revenues for the industry on an average.
Major Markets: The biggest consumers of cement is Housing and real estate which constitutes about 70% of the total market. The rest is
used in industries and Infrastructure projects.
Major Players: The top 5 Players account for 50% of the market share with Ultratech having a 23% market share. The growth has been
fueled by acquisitions and consolidation has been the theme by large
Growth in demand: Cement production is expected to increase by ~12% YoY, and likely to add ~80 million tonnes (MT) capacity by FY24,
driven by rural housing demand and government’s strong focus on infrastructure development.
Opportunities: Government schemes like PM Gati Shakti and Pradhan Mantri Awaaz yojana will boost the cement demand for the future.
AMRUT scheme for development of smart cities will also boost demand in the near future. It has a huge potential to increase spends on
the Infrastructure and expand on that market
Entry barrier: Govt. by increasing incentives and providing easy debt system can increase competition and decrease entry barrier in
cement industry.
Challeges and path forward
Environmental Challenges: The cement production process is very harmful for the environment and leads to emission of CO2. There has
been a lot of stress on the reduction in CO2 emissions and use of clean energy in production and logistics. Every company that wants to
thrive and sustain have to focus on reducing environmental damage. This could otherwise lead to a lot of fines and bad publicity. A lot of
companies are aiming at carbon neutrality goals by introducing efficient carbon capture units and using alternate fuels
High Capital Expenditure Requirements: High Lending rates by banks hinders growth as High CAPEX is required in cement industry. The
companies need to adopt a leaner model for curtailing fixed costs as well as optimizing working capital. It is commendable how the
companies have emerged out of Covid because of cutting down on costs when the demand was restricted
Availability of Raw Material and its feasibility: Final Product requires high quality inputs and there are a lot of restrictions around its
procurement and mining. There is high tariffs and royalty on limestone hence these factors lead to cost increases. The companies need
to be proactive in adopting to the regulations and figuring out the best legal structure to operate in.
Current CO2 Emissions and Targets
Thank You
REFERENCES:
[1] ttps://www.ibef.org/industry/cement
{2] IIM B, Industry analysis case book 2021
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CEMENT INDUSTRY

India's cement production is projected growth at a

Key government initiatives like urban infrastructure,

Installed capacity : Production:

Current CO2 Emissions and Targets

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