The consistent growth of the infrastructure and housing sectors has increased the demand for cement, bringing cheer to the cement transportation market. Apart from the entry of more global cement manufacturers, the cement transportation market will also benefit from favorable government initiatives related to various infrastructure projects and urban development, which can revive the housing sector also. Frost & Sullivan, in a recent analysis, found the industry dispatched 167.7 million tonne of cement in 2008 and is expected to dispatch 263.8 million tonne in 2014.
The Centre has raised budgetary allocation for roads under the National Highways Development Project , which has considerably boosted cement consumption. The government move for fresh industry sops is likely to promote business environment.
??The recent 4% cut in the excise duty, relief on exports and a bailout package for the housing sector will further drive the revenues and enhance margins for the cement industry and thereby, its transport market,?? said Frost & Sullivan industry analyst Srinath Manda.
Despite the government?s interest in the housing industry, adverse tax policies and limitations in basic infrastructure facilities are restraining the growth of the cement industry and curbing the potential of the cement transportation market.
The appointment of coal regulator is a positive move for the cement industry as it will facilitate timely and proper allocation of coal blocks (a key raw material) to the core sectors, cements being one of them.
As cement is a high-bulk, low-value, freight-intensive commodity, transporting it over distances more than 400 km becomes commercially unviable. This has resulted in regional cement participants serving regional markets. While inland waterways account for only a minor percentage of domestic cement transport, road is the main mode of transport, though rail is the preferred mode for most companies because it is the cheapest, fastest (for long distances) and safest mode of transport for cement.
“The southern region, with its large limestone reserves, has significant overcapacity, resulting in considerable net dispatches from the south to the west in 2008,” noted Manda. “Meanwhile, the northern region dispatched about 4,612 thousand tonne of cement to central region and 2,515 thousand tonne of cement to western region during the same year.”