The New Deal

The New Deal

The growth of global cement industry is accelerating at 4.2 per cent while cement consumption is reaching 4.21 billion tonne, up from 3.9 percent projected in February this year. The Indian cement sector too is in upswing mood. The sector has been expanding on the back of increasing infrastructure activities and demand from the housing sector over the past few months. According to data released by the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted foreign direct investment (FDI) worth Rs 13,546.47 crore (US$ 2.23 billion) in last quarter. India has huge potential in infrastructure and construction, and the cement sector in India is set to receive a major boost.

The Government of India is allocating funds to several infrastructure projects in the urban as well as rural areas. There are a number of notable infrastructural projects already coming up in the country. For instance, Indian engineers are working in the Himalayas to build the world´s highest railway bridge which is expected to be 35 metre taller than the Eiffel Tower when completed in 2016.

Many foreign companies are looking for investing in the Indian cement industry to cash in on the opportunities in this market. Renewed confidence in the construction market will affect the general global outlook very positively. Experts have projected annual cement consumption reaching 4.8 billion tonne by 2018.

The industry is set to grow and the cement companies are doing their best to grab the biggest piece of pie when it is served. The challenge that the industry will face in the future is dealing with oversupply of cement in the market. The industry has already invested heavily in improving energy efficiency. Cutting down prices too is no longer a viable option, as the prices have already hit the bottom. The next year will see competition at different level, on different grounds. Accessibility to their products will be the deciding factor for the company´s profitability. Network spread and dealers´ performance is at the core of growth strategy of top cement companies. No wonder that companies are trying to grab retailers from each other´s network. The recent hype in construction sector has led to mushrooming of small cement retail shops at every nook and corner. And cement companies too have not held back from giving dealership to everyone that comes to them. It will be interesting to see how the dealers deal with the challenges that lie ahead of them in a highly saturated market.

Pratap Padode
Follow me on twitter@PratapPadode

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