Production to reach 300 million tonnes by 2012 financial year.
The cement industry is poised for expansion on the back of a reasonable recovery in the domestic economy and demand for cement hitting double-digit growth trajectory. The industry is undergoing expansions worth Rs 50,000 crore to take the overall capacity to close to 300 million tonnes (MT) by 2012.
Companies enjoying firm pricing situation of the building commodity say the coming years, too, will see good consumption growth. The profitable period, which started in the middle of the current decade, is the longest profitable cycle for the industry. Expansions are being planned taking into account the expected rise in demand in the next five years.
Swiss cement major Holcim, which owns domestic entities ACC and Ambuja Cements, plans to pump in over $1 billion (Rs 4,642 crore) to add 10 MT to take its production capacity to 60 MT.
| FIRM GROWTH Cement capacity and production since 2003-04 | ||
| Year | Capacity | Production |
| 2003-04 | 146.32 | 117.50 |
| 2004-05 | 153.97 | 127.57 |
| 2005-06 | 160.37 | 141.81 |
| 2006-07 | 167.96 | 155.66 |
| 2007-08 | 198.30 | 168.32 |
| 2008-09 | 219.20 | 181.42 |
| 2009-10* | 245.00 | 205.00 |
| All figures in million tonnes * Industry estimates Source: Cement Manufacturers' Association | ||
Aditya Birla Group, which owns Grasim and UltraTech, will add 25 MT at an investment of Rs 14,000 crore ($3 billion) in the next five years to ramp up capacity to 75 MT.
Industry analysts say new cement plants take two-three years to start production. “If the companies do not start planning for a demand of over 9 per cent on a year-on-year basis, there will be capacity constraints by 2014,” said an analyst with a broking house.
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Industry experts say the growth of the cement industry is in correlation with the growth of Gross Domestic Product on a factor of 1.2-1.3x. With the economy expected to grow at over 7 per cent, cement demand is likely to rise more than 9 per cent.
By the end of this financial year, cement consumption will be close to 205 MT, while capacity will stand at 250 MT. Since, several of the fresh units may not run at full capacity, 2011 financial year may see a good demand- supply match. “There will be an effective surplus of 30-35 MT in 2012,” said sources in the industry.
Holcim and Birla entities control over one-third of the country’s cement manufacturing capacities.
Jaiprakash Associates, one of the North-based dominant cement makers, has increased its target to 35 MT per annum from 22 MT. Shree Cement is contemplating to set up plants in Chhattisgarh and Karnataka over the next two-five years. French cement major and world’s largest manufacturer Lafarge is aggressively looking for expansion in the country.
According to government estimates, India would require 600 MT of capacities by 2020. On an average, 1 MT of greenfield project needs Rs 400 crore. The cement industry will require over Rs 100,000 crore of investment to build enough capacity to cater to the rising demand.