Cement sector to see investments of Rs 3 lakh crore in next decade

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THE cement sector may have witnessed meagre growth of less than four per cent in 2013-14, but in the long run there is significant potential for the sector to grow and it is likely to witness investment of around Rs 3 lakh crore in the next decade.

Cement industry growth during the next decade looks promising and cement demand is projected to grow more than double in volume terms by 2025. Per capita cement consumption is likely to increase from 185 kg currently to 385-415 kg by that year. This growth will likely be led by investments in the infrastructure sector, with sub-sectors such as roads, power and irrigation leading the charge, according to a CCI report.

“As we look to the future of India’s dynamic cement industry, we expect robust growth to continue. The nation’s cement demand is expected to reach 550-600 million tonne per annum (mtpa) by 2025, mainly as a result of infrastructure and housing needs as India continues to urbanise,” said the report.

Residential demand will be driven by increasing urbanisation, a rise in the number of nuclear family households, and upgrades from non-pucca to more permanent concrete houses. The residential sector will remain one of the largest consumers with 42-45 per cent of total demand in 2025, but also will likely see increased consolidation among real estate players, said the report.

Vinita Singhania, MD of JK Lakshmi Cement, said, “It’s true at the moment the sector is under stress but in the long term the sector has to grow as infrastructure of the country cannot remain at the same level. Once the infrastructure projects start getting executed, demand will also eventually grow.”

Also with the new government settling down, there will be more focus on execution of projects which are stalled at the moment. Going forward, there is lot of potential for the sector and it will witness strong growth, Singhania added.

Vinod Juneja, MD at Binani Cement, also said that in future the sector is expected to perform well as demand is expected to revive from sectors like real estate and infrastructure. However, meeting demand will require considerable capacity addition and a sharp rise in available resources, which could present challenges.

With the increase in demand, resource requirements for the sector will also rise. An additional capacity of 330-380 mtpa for cement and 240-270 mtpa for clinker could be required by 2025, translating to an investment of close to Rs 3 lakh crore, said CII report.

However, an unattractive tax and infrastructure environment would make it difficult to bring in this investment. In addition, continuous improvement would strengthen the industry’s operating cost structure by re-evaluating asset footprints, increasing automation, improving power and thermal efficiency, and striving toward leaner organisational structures, the report added.

Also energy security will become a key concern for the industry. Proactive use of waste heat recovery, alternative fuels and raw materials, and renewables will become important alternatives to domestic coal. The split between imported coal and pet coke (both domestic and imported) will be governed by prevailing market prices and availability. These changes will lead to a significant shift in the overall cement customer mix. The share of large and direct buyers (contractors and developers) is expected to increase from 30 per cent currently to 70 per cent by 2025.

India has the second-largest cement market in the world in terms of cement production and demand. However, the country’s economy ranks near the bottom in cement consumed per unit GDP when compared to other economies at similar prosperity levels. India’s cement intensity is significantly lower than those of high cement-intensive countries, such as China, Turkey, Korea and Italy. When compared with low cement-intensive countries, India’s cement intensity is close to average, indicating there is room for growth in cement demand.


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