Cement industry has been playing a key role in the economic growth of India and simultaneously increases the construction industry and adds on to the GDP of the country. Our country has seen the same trend with some variations for several previous years. Indian cement industry has shown strong yet stable growth for a long having faced various economic ups and downs. But the last financial has manifested to be a crucial time. All the cement manufacturers were sitting back because various factors like demand slowdown due to delayed infrastructure development projects, slower real estate industry and a notable downward curve in margins due to increase in operating costs. Due to this revenues declined significantly and so was the effect on the profitability of the manufacturers.
Cement manufacturers majorly depend on lot of factors in entire manufacturing process but more importantly survives on the timely availability of coal, power and transport facilities. For last couple of years a substantial increase of 32% has been noted in coal, cost of using power has surged to 22% and the bumpy rides of crude oil prices has put all the calculation on stake. But after these many setback the industry looked stable as most of the cement producers spend big rupees on exceeding capacities so that they were able to manage not to surpass the rise in costs. This industry, being capital intensive is excessively leveraged, hence the margins were further decreased having an impact of larger payments in terms of interest rates.
Industry analysts do not see this time to last further as they expect the demand to gain the same momentum again in coming months. I believe growth in the construction and real estate industry is unavoidable and will shortly gain some pace. The growth is certain in corporate and housing segment as the infrastructure development plans in this five year plan seems good. Looking at a positive rise in middle class population, an increase in urbanization and shortage of accommodation provisions for a particular section of society are respectively the signs of expecting a positive turn in the cement industry.
How does coal effect- The production of cement depends on coal significantly, which is indeed one of the very essential elements involved in the entire cement production process. The production process requires great amount of energy and coal is one of the primary sources available for the same. Being one of the major industries. Cement industry too has some short and long linkages. CIL (Coal India limited) and one other, but for last few years the supply has been lesser by more than half of the requirement. So this shortage has pushed Indian cement industry to look for the alternative for coal in, which it replenishes with pet coke, imports and procurement from some open markets. If a fact to be believed, 900 grams of cement is produced with the help of 450 grams of coal. Indian cement industry has swallowed 27.33, 29.57 and 25.80 metric ton of coal to produce of 168.31, 181.61 and 202.25 metric ton of cement in financial years 2008, 2009 and 2010 respectively. Due to significant increase in the coal price and naturally CIL has increased the price too, the cement manufacturers hesitates to transfer this huge price increase burden to the buyers and end users and thereby there are narrow lines in the margin graph.
Distribution channel improvement
Once the recovery takes place there can be some ideal solutions to boost the convenience to all the end users in term of procuring cement. One can think of buying cement online. This can be proved as a new form to go nearer to the new customer experience. The cement companies can utilize information technology in form of various tools to forecast demands and design better distribution channels and can easily have metrics to measure the performance too. For more effective and most optimum cement distribution system, the logistics team can have integration entire system for better efficiency. Most important should include in integration all the mediums of movement of cement, information about it storage and the entire cycle of its management.
Best cement in south India or best cement in north India will no more be categorized this way if the end user can be provided with an app to use on his or her mobile device, which may include the signification information to inform about how to order depending on ones location. The app could be conveniently used to gain knowledge about know how about the cement requirements for a particular construction.
There can be blue print of the construction which can be sent to the company as an enquiry about approximately how much cement would be used. The end user can be provided with all the relevant information about the quantity and so on. If this can be implemented in a more streamlined way cement purchase in India will be more convenient and people will be more inclined towards this and a company can end up having more satisfied customer base.
Cement manufacturers majorly depend on lot of factors in entire manufacturing process but more importantly survives on the timely availability of coal, power and transport facilities. For last couple of years a substantial increase of 32% has been noted in coal, cost of using power has surged to 22% and the bumpy rides of crude oil prices has put all the calculation on stake. But after these many setback the industry looked stable as most of the cement producers spend big rupees on exceeding capacities so that they were able to manage not to surpass the rise in costs. This industry, being capital intensive is excessively leveraged, hence the margins were further decreased having an impact of larger payments in terms of interest rates.
Industry analysts do not see this time to last further as they expect the demand to gain the same momentum again in coming months. I believe growth in the construction and real estate industry is unavoidable and will shortly gain some pace. The growth is certain in corporate and housing segment as the infrastructure development plans in this five year plan seems good. Looking at a positive rise in middle class population, an increase in urbanization and shortage of accommodation provisions for a particular section of society are respectively the signs of expecting a positive turn in the cement industry.
How does coal effect- The production of cement depends on coal significantly, which is indeed one of the very essential elements involved in the entire cement production process. The production process requires great amount of energy and coal is one of the primary sources available for the same. Being one of the major industries. Cement industry too has some short and long linkages. CIL (Coal India limited) and one other, but for last few years the supply has been lesser by more than half of the requirement. So this shortage has pushed Indian cement industry to look for the alternative for coal in, which it replenishes with pet coke, imports and procurement from some open markets. If a fact to be believed, 900 grams of cement is produced with the help of 450 grams of coal. Indian cement industry has swallowed 27.33, 29.57 and 25.80 metric ton of coal to produce of 168.31, 181.61 and 202.25 metric ton of cement in financial years 2008, 2009 and 2010 respectively. Due to significant increase in the coal price and naturally CIL has increased the price too, the cement manufacturers hesitates to transfer this huge price increase burden to the buyers and end users and thereby there are narrow lines in the margin graph.
Distribution channel improvement
Once the recovery takes place there can be some ideal solutions to boost the convenience to all the end users in term of procuring cement. One can think of buying cement online. This can be proved as a new form to go nearer to the new customer experience. The cement companies can utilize information technology in form of various tools to forecast demands and design better distribution channels and can easily have metrics to measure the performance too. For more effective and most optimum cement distribution system, the logistics team can have integration entire system for better efficiency. Most important should include in integration all the mediums of movement of cement, information about it storage and the entire cycle of its management.
Best cement in south India or best cement in north India will no more be categorized this way if the end user can be provided with an app to use on his or her mobile device, which may include the signification information to inform about how to order depending on ones location. The app could be conveniently used to gain knowledge about know how about the cement requirements for a particular construction.
There can be blue print of the construction which can be sent to the company as an enquiry about approximately how much cement would be used. The end user can be provided with all the relevant information about the quantity and so on. If this can be implemented in a more streamlined way cement purchase in India will be more convenient and people will be more inclined towards this and a company can end up having more satisfied customer base.