A Study on Cement Exports in India

In the race to become the most economic superpower, China has generally outperformed India, and with exception of telecom & IT, India has had trouble slaying the Chinese dragon. But now we can add another sector to the Indian success story, i.e., Cement. In last ten years, this sector has recorded a CAGR of 8%, against the world cement industry average of 3.5% and China’s cement industry growth rate of 7.2%. Today this industry not only outshines that of developed countries such as US and Japan but also has become the second largest cement producer in the world after China. The cement industry has continued its growth trajectory over the past ten years. Domestic cement demand growth has surpassed the economic growth rate for the past three years. Cement demand in the country grows at roughly 1.5 times the GDP growth rate. The industry had a turnover of around US$ 7.8 billion in 2003-04 and according to CRISIL is expected to grow at a CAGR of around 7 per cent in the next five years. The key drivers for cement demand are real estate sector, infrastructure and industry expansion projects. Among these real estate sector is the key driver of cement demand. The demand for cement is closely related to the growth in the construction sector. Consequently, cement demand has been posting a healthy growth rate of around 8 per cent since 1997-98, propelled by the increased thrust on infrastructure development, and the higher demand from the housing sector and industrial projects. Cement is bulky commodity and cannot be easily transported over long distances making it a regional market place, with the nation being divided into five regions. Each region is characterized by its own demand-supply dynamics. Over the past few years the cost of cement production has grown at a CAGR of 8.4%. With increase in infrastructure development activity with projects such as state and national highways, and global demand has led Indian cement industry to increase their production capacity. This inturn has attracted the top cement companies in the world to enter the Indian market and take the advantage of growth in demand. The cement sector continues to emphasize on cost cutting through enhanced productivity, reduction in energy costs and logistic expenses. The government has considered spending more than US $500 billion on infrastructure in the 11th five year plan. Apart from this railways, urban infrastructure, ports, airports, IT sector, organized retailing, malls and multiplexes will be the main sectors driving the demand of cement in the country. So we can see that cement industry is moving towards both challenges and opportunities poised by the presence of domestic and global players in the Indian market. This trend is likely to continue in the coming years.