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Cement





Evolving landscape

  • India is the second largest producer of cement in the world after China. The cement industry’s capacity sometime ago was around 160 million tonnes. This includes the output of mini cement plants. The industry comprises over 54 cement players and more than 129 manufacturing plants. It is highly fragmented and regional in nature.
  • The estimated market size in value is around US $8.89 billion and around 130 million tonnes per annum in volume. It owes its regional nature to the concentration of cement plants near the clusters of limestone reserves located only in few states. This has led to a surplus situation in some regions and shortages in others.
  • India is one of the fastest growing markets for cement at 7.2 per cent CAGR (2000-05). The country’s demand is riding high on continuing growth in all sectors, especially in the IT/ITeS, hospitality industries which in turn has driven the retail, real-estate and infrastructure boom. Even though the industry has huge potential, it faces certain challenges. For  instance, the high power and fuel costs and erratic power supply in most of states is affecting the performance of companies. Hence, most have opted to set up their own captive power units to ensure regular supply of power, thereby optimising costs.

Key drivers of growth

  • Strong housing demand
  • High level of commercial construction activity
  • Increased government focus on infrastructure spending
  • Higher investment in industrial projects
  • The industry is not only looking for locations with availability of limestone for production of cement, but also for availability of coal for their captive power plants

Cement powerhouse

  • MP is the country’s third largest producer of cement. It caters to 13 per cent of national demand. The state’s rich limestone reserves and the logistical advantages of these sites reduces the overall cement manufacturing and supply chain cost, helping cement companies to get a higher return on investment.
  • Several major groups such as Birla Corporation, Vikram Cement, Prism Cement, J.P. Rewa, Diamond Cements, and ACC operate in MP. Of these, JP Rewa and ACC are in process of investing US $244 million for expanding their production capacities. The state also has the appropriate knowledge pool to operate cement plants.
  • Being centrally located and close to key cement consuming states like Maharashtra, Uttar Pradesh, Gujarat, Andhra Pradesh etc, cement plants in MP can cater to different regions of the state. They have the benefit of benefit of stable market demand. This in turn has helped the state to achieve one of the highest capacity utilisation rates. (around 94 per cent).
  • It is estimated that India needs an additional capacity of around 70 mt to meet its domestic demand by 2009. With its inherent advantages in terms of availability of raw material and its cost competitiveness, MP is likely to continue as a leader in cement industry.

Natural strengths

  • MP has vast limestone reserves of 3,625.98 million tonnes spread over the districts of Damoh, Hoshangabad, Mandsaur, Narsinghpur, Rewa, Satna, Panna, Katni, Sagar, Dhar, Khargone, Jhabua, Balaghat, Sidhi and Morena.
  • In India, energy costs account for 35 per cent of total production costs,and is growing fast. The industry is trying to protect itself against this by setting up captive thermal power plants which cut costs by 16-20 per cent. MP has several locations (marked in circle) that offer limestone and coal. This provides a good opportunity to set-up a captive power plant to ensure regular, cost competitive power.
  • The industry is expected to witness a significant boom as several projects of similar profile are likely to mushroom near state’s limestone reserves.

Add-ons

  • With land rates being as low as US $2 per square metre in the industrial belts of Rewa, land costs are the lowest in MP. Key cement markets are close to MP and are well connected by rail and road. This ensures high and sustained demand of cement produced in these plants.
  • MP also has a strategic locational advantage since key cement consuming centres like Kanpur, Nagpur, Patna, Nasik are close to its limestone reserves. Since freight expenses form 16-22 per cent of operating costs, the proximity to these markets gives the state a cost edge.
  • The largest cement consuming states of Maharashtra and Uttar Pradesh are also the most deficient. They have only 1.9 per cent and one per cent of the country’s total limestone reserves.
  • Even today around 25 per cent of the cement produced in central India is exported to surrounding states in the North, East and West. With growing industrial and infrastructural activity expected to occur, MP holds a huge potential for cement manufacturers.

An investment destination in waiting

  • Seven major cement plants are operating in  with the annual installed capacity of 15.97 million tonnes. Availability of raw material has helped several leading players to set up shop in the state. Expansion is on the cards. For instance. Satna has the largest number of cement plants in the country.
  • The MP State Industrial Development Corporation has prospected the Damoh-Panna area as well as the Bela-Pagra of Rewa which have limestone deposits of eight million tonnes and 20 million tonnes respectively. The area around Raghurajnagar and the Nagod tehsil of Satna also have limestone deposits.

Proposed projects


Location

Player

Description

Sidhi

Jaiprakash Associates Ltd.

Install Cement unit with installed capacity of 2 million tonnes

Satna

JV (SAIL & JAL)

Install Cement unit with installed capacity of 2.2 million tonnes

Satna

M/s Rewati Investments

Install Cement unit with installed capacity of 2 million tonnes

New Limestone Area

Grasim

Install a Cement plant with an investment commitment of US$ 111 million


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23 July 2017
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