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India Cement Industry 1H 2011
Emerging Markets Direct, Nov 2011, Pages: 60
India Cement Industry 1H 2011 covers the performance of the global and India cement industry in terms of production, consumption, imports, exports, and reserves. It also covers the role of cement production, consumption,demand -supply dynamics and, market trends and outlook, plus the profile, comparative matrix and SWOT analysis of the industry leading players.
A resurging post-economic crisis growth and the increasing pressure on natural resources which pushes the prices of inputs and energy to record levels are two dominant themes of year 2010 global and local economies. The pressure on resources has been exacerbated further by natural disasters like the earthquake and tsunami in Japan and manmade political unrest gripping the whole of the Middle East and North Africa. The impact of these events has percolated into the Indian economy as well. As a result, Indian businesses have come under increasing cost pressures, while enjoying healthy growth.
Economic recovery, which had gained momentum in the first half of FY11, started showing signs of moderation in the second half. The biggest hindrance to growth momentum, however, has been high inflation. Inflation refuses to abate and has forced RBI to pursue monetary tightening measures even at the cost of growth. Rising energy prices and interest rates will continue to pose a challenge for businesses in the near future. Despite these short term challenges, the overall economic sentiment remains healthy and we expect a good growth rate for the next year as well.
FY11 was quite challenging for the cement industry. On the one hand, demand growth weakened due to lower realty and infrastructure spending, while on the other, extended monsoons and logistical constraints dampened construction activity. On the supply front, overcapacity continued to plague the industry. During the year, the industry witnessed capacity addition of around 28 million TPA in addition to the 60 million TPA added in the previous year. Industry capacity utilization was at 75% against 84% recorded in the previous year.
Surplus cement scenario together with sluggish demand and volatile prices adversely impacted domestic realizations which were lower by 4% as compared to the previous year.
On the cost front, the higher price of both domestic and imported coal resulted in a 25% increase in energy costs, which rose substantially from 671/ton to 838/ton. During the year, imported coal prices rose by 36% from CIF US$ 89/ton to USD 121/ton. In addition to the normal price hike in domestic coal, there was a further increase in domestic coal prices in the range of 30%-150% from 1st March, 2011,on. The full impact of the increase will be seen in FY12.
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