India: caught in a down-cycle

Published 06 December 2011

These are important times for the Indian cement sector as the country’s cement producers see cement sales dip and energy costs squeeze margins. New capacity projects are being delayed as the oversupply situation becomes more apparent and under the current circumstances the industry may have to wait longer than anticipated for a much needed upturn.

An overview of key developments in the Indian cement sector ahead of the NCB’s 12th International Seminar

on Cement and Building Materials to be held in New Delhi on 15-18 November 2011

India, the world’s second largest cement market with a capacity of 300Mta, is undergoing its toughest phase for over a decade. Hopes for an end to the current downturn have failed to transpire into reality as estimates by policy makers and cement companies have fallen for the FY10-11 period. These are uncertain times for the industry and cement manufacturers have no option but to wait patiently for the next up-cycle.

Snapshot of FY10-11

Industry hits 10-year low

Table 1: demand growth for last decade
Year  Dispatches (Mt) Change (%)
2001-02 102.37 9.56
2002-03 111.07 8.50
2003-04 >117.23 5.50
2004-05 127.14 8.45
2005-06 141.57 11.35
2006-07 155.26 9.67
2007-08 167.69 8.01
2008-09 180.95 7.91
2009-10  200.29 10.68
2010-11 209.54 4.61
Source: CMA and companies

After posting robust double-digit growth of 10.54 per cent in the FY09-10, the Indian cement industry failed to continue this high-growth trajectory in FY10-11. Cement makers could not meet the 9-10 per cent forecasts and registered just 4.6 growth – almost half the figure that had been projected and the smallest advance for a decade.
Domestic cement sales were 209.54Mt in 2010-11 compared with 200.29Mt the year before. Likewise, production grew by 4.75 per cent to 210.51Mt compared with 200.96Mt in the previous financial year.

This is the first time since the industry entered its boom phase in mid-2005 that cement maker’s high-growth graph dipped to such lows. The falls are attributed to persistent poor demand throughout the year. While cement makers were hopeful that the 2010 Commonwealth Games in New Delhi, would keep cement demand robust due to several major infrastructure related projects, clear signs of a consumption slowdown had started emerging which were magnified following the completion of the Games in October last year.

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