Bullish on sector, UltraTech says cement demand likely to grow 8% in 2018-19

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Mumbai | Published: April 21, 2018 4:27:43 AM

The cement demand in the country could well grow by about 8% in 2018-2019, led by government spending on infrastructure.

UltraTech, UltraTech Cement, cement industry, India Brand Equity Foundation, commerce ministry, Aditya Birla groupAccording to India Brand Equity Foundation (IBEF), housing sector accounts for about 67% of the total cement consumption in India, while infrastructure makes up for 13% of the consumption. (Reuters)

The cement demand in the country could well grow by about 8% in 2018-2019, led by government spending on infrastructure. Atul Daga, chief financial officer, UltraTech Cement, told FE that the company is bullish on the growth prospects for the cement industry as the government goes big on roads and metro spends. “Bulk of demand is being generated from infrastructure spending. Roads and metro are driving this growth. Around 17-18 cities have seen metro work start which is good news for the cement sector,” he said. Even as the infrastructure sector is looking up, the housing segment, which is the biggest demand driver for cement has still not started growing. However, Daga said infrastructure spending will be a trigger for housing spends, which should start from the next financial year.

According to India Brand Equity Foundation (IBEF), housing sector accounts for about 67% of the total cement consumption in India, while infrastructure makes up for 13% of the consumption. IBEF is a trust established by the department of commerce under the commerce ministry.
The Aditya Birla group company commissioned a greenfield clinker capacity of 2.5 million tonnes per annum at Manawar in Dhar district of Madhya Pradesh. The plant will help the company in catering to the growing demand for cement from the government housing sector in central India.

Daga said the company gets to capture the market in the range of 300 kilometres around the industrial belt of Indore-Dewas-Ratlam-Pithampur, which are fast growing markets. “Madhya Pradesh is fastest growing market for cement due to the Centre’s affordable housing and low-income housing programmes. MP has done the maximum number of houses till now. Along with this lot of industrial activity is happening in MP as also the road network programme in the state is driving cement demand,” Daga said.

MP has about 35 million tonnes of installed cement capacity with a capacity utilisation of close to 80%. “This means it is a 28-30 million tonnes of market growing at about 8%,” he said. The plant has been set up at less than $90/mt, which he said was a benchmark in setting up a greenfield unit. It was commissioned in a record time of less than one year. Along with the kiln, UltraTech has also commissioned a cement grinding facility of 1.75 mtpa capacity and an auto loading facility. Another cement grinding facility of 1.75 mtpa capacity as well as a waste heat recovery system of 13 MW capacity is under execution and both are expected to be completed before September 2018.

The plant will also help the company to enhance its presence in the northern markets, by re-allocating its capacities suitably. Daga explained that till now the cement demand in the region was being serviced by the company’s plant on the MP-Rajasthan border, which will change now. The company will also save on logistics, which accounts for nearly 35% of the cost for cement companies, he said.

With the commissioning of this plant, UltraTech now has 19 integrated plants. The total cement manufacturing capacity will stand augmented to 96.5 mtpa. India’s total cement production capacity is nearly 425 million tonnes, as of September 2017, data from IBEF shows. The industry is currently producing 280 MT for meeting its domestic demand and 5 MT for exports requirement. The country’s per capita consumption stands at around 225 kg.

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