Construction boom spurs India’s cement industry

Propelled by a boom in construction sector, the Indian cement industry recorded a growth of over seven per cent even though a slump in prices was seen towards the end of 2004.  Intense construction work in road and highways during the year spurred demand for cement though the transporters’ strike came in the way of higher growth by affecting despatches of cement to various destinations.

The positive factors led to fresh investment plans in the sector as company after company realised potential of creating new capacity due to sharp increase in demand. The year also saw the successful de-merger of Larsen and Toubro’s (L&T) cement division in favour of Grasim Industries. L&T demerged its 17.5 million tonne cement division after rechristening it as Ultra Tech Cement in favour of Grasim. This made Aditya Birla group company the eighth largest global player with 31Mt installed annual capacity.

The Birla group also announced a Rs 2 billion expansion plan for raising capacities at various plants by two million tonne through debottlenecking in next two years. ACC made intention clear that it wants to tap lucrative Chinese market although cement exports from India is yet to make to any mark in the global arena. The Ambuja Group also took a major decision to invest Rs1bn to set up a cement grinding plant at Dadri in Uttar Pradesh during the year.

It is also felt that the phase of housing boom witnessed during last couple of years seems to have mellowed down a bit during the second half of the year. Growth in housing industry seems to have changed gear as the rate of interest that touched as low as seven per cent has started moving up.  Leading housing finance companies like HDFC, SBI Housing Finance and LICHFL have raised their interest rates retarding the pace of house construction activities. Experts feel that the real impact of rise in home loan interest rates would be clear only after a year or so.