Cement Industry Essay

INTRODUCTION India is the world’s second largest producer of cement with a total capacity of 224 million tonnes as on April 30 2010, according to Cement Manufacturers Association. Cement is a key infrastructure industry. It was decontrolled from price and distribution on 1st March 1989 and delicensed on 25th July 1991. However, the performance of the industry and prices of cement are monitored regularly. With Govt. f India giving boost to various infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace. THE INDUSTRY: NATURE & DRIVERS The bargaining power of suppliers in the cement industry is high owing to large and few suppliers and no substitutes. The bargaining power of buyers varies from low to medium owing to cement being a standard product and lack of substitutes.

The intensity of rivalry remains medium because of equally balanced competitors, high +fixed cost, lack of switching cost, capacity augmentation in large increments and high exit barriers. We take a snapshot of the current trends in the industry. Post the recession the Indian cement industry has outpaced the growth rates of other prominent industries in the country, on the back of growing demand from the housing sector, increased activity in infrastructure development and exports recovery.

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The key drivers for cement demand are real estate sector, infrastructure and industrial expansion projects. Among these real estate sector accounted for 55% in financial year 2007 alone. Cement production increased 10. 8% year on year in 2009-10. Almost all cement majors expanded their installed capacity in the backdrop of govt. backed construction project, since these projects have created a strong demand for cement in the country. It is anticipated that the trend will continue and will grow at a CAGR of around 10. 5% during 2010-14.

The ministry of road and transport highways has planned to invest US $354 billion road infrastructure by 2010. This would accelerate the consumption of cement in the union budget 2010-11, US $ 37. 4 billion has been provided for infrastructure development. The govt. has also increased budgetary allocation for roads by 13% to US $ 4. 3 billion. THE INDUSTRY: ANALYSIS OF PRICES, SUPPLY & DEMAND FORCES To understand the supply and demand forces in a better perspective we take up the time frame from 2003-2005 and analyse the prices therein.


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