News Feed

Indian cement sector welcomes consolidation; demand shows steady rise at CAGR of 9.3%

Posted on : 26 Jul, 2012

 

The Indian cement industry, which is the second-largest globally, is welcoming consolidation. It was reported that market leader A V Birla group, French major Lafarge and Swiss specialist Holcim with the second-largest domestic capacity, are in talks with Jaiprakash Associates based in New Delhi, to acquire its cement plants in Gujarat and Andhra Pradesh. Lafarge’s focus is on readymix concrete as it plans to double its 8 MT capacity in the coming years, while Holcim’s capacity through ACC and Gujarat Ambuja is 45 MT.

 

According to analysts, the ratio of overall capacity utilisation rate to the utilisation rate at the breakeven point in a particular year has lowered in the past three years and remains at a level of two, implying pricing power. More capacity addition is in the pipeline, with about 86 million tonnes expected to be added in FY 12-14.

 

For the next two years, demand is likely to remain steady and rise at CAGR of 9.3%. This price trend would bring the Jaypee Group at least $ 160 per tonnes based on replacement value on its plants in western and southern India, of 2 units of 2.4 MT each and 1 unit of 5 MTPA respectively. Since cost of green-field capacity has gone up from $120/t to $160/t, these plants would be valued at around Rs. 9,000 crore.

 

Ultimately, cement demand indicates steady construction activity and proactive policy would enhance growth and investment.

 

In reference to above scenario, details of the demand, prospects and investment in India’s cement sector will be spotlighted at the 14^th Asia CemenTrade in Yangon from 13-14 September. Alok Agarwal, Senior Executive Director at Binani Cement is slated to deliver a session entitled “Is the Recovery of Cement Sector in India Sustainable”. Register here to be a part of this event or forward queries to Ms. Grace at grace@cmtsp.com.sg

 

Read complete article here.