One of the vital characteristics of a developed nation is its infrastructure. Cement is the most crucial element for its growth, and is hence a major factor behind the development of a country and its economy.
India is the second largest cement manufacturer in the world and accounts for over 7% of the global capacity. 98% of the production from the country lies with the private sector while the rest is completed by the government.
The country’s cement industry has huge potential for growth because of the high abundance of limestone deposits, the primary material used in cement production. Industry experts also project a rosy picture of India becoming the main exporter of clinker cement to developing nations of the world in the next 10 years. India’s cement production capacity is too expected to reach 550 MT by 2025 whereas the demand in the country might is forecast to touch 420 MT by FY 2027 on the back of massive expansion in different sectors of domestic to commercial and industrial spheres.
But there are several underlying factors that many presume might derail the country’s cement industry’s growth process. Of all cement, scarcity is the single biggest factor believed to be causing a setback to the ambitious prospect of the cement industry in the country.
Cement is a pivotal spoke in the growth of a nation’s economy. Scarcity in cement is sure to derail the overall progress of a nation. Under such a light, the shortage of cement is a hot topic today in industrial discussions in India. And it becomes even more important at a time when the country is battling inflation at a serious rate. Experts have attributed several underlying causes behind cement scarcity plaguing the industry.
- Coal crisis:
India is currently battling high inflation and a severe coal shortage which is adversely affecting the cement industry, most importantly causing cement scarcity. Coal is an extremely essential ingredient in cement industries and therefore the issue has become a hot topic. India’s coal crunch is fuelling a rise in cement prices. Data show that about 25 tonnes of coal are needed to produce 100 tons of cement. Coal price accounts for 20% of the cement price.
- Rising production costs:
Cement companies are facing immense pressure due to steep increases in the cost of production. This is mostly fuelled by unprecedented increase, almost double, in the price of thermal coal and pet coke apart from the spiraling prices of petroleum products. Not only that, the rates of other cement raw commodities such as sand, gypsum, fly ash, and coal going through the roof thereby adding to the worries of high input costs.
- Russia-Ukraine crisis:
The hope of cement majors for smooth revival after the pandemic shock suffered a major blow in the name of the Russia-Ukraine conflict. The war catapulted the shortage of coal and oil in the market and consequently hit the cement sector hard. In order to tide over the crisis, while the government is buying oil at a cheap rate from Russia, cement manufacturers are importing pet coke from Venezuela, which is an expensive but effective coal alternative.
- Power shortage:
Power cuts to the inadequate electricity supply are hitting the energy-intensive cement industry. Various cement plants have developed their own captive plants but this has also simultaneously increased their cost of production. This has affected the margins in the industry. Industry supply chains are reeling under the heat as producers are compelled to buy coal at inflated prices and also are forced to source power from the grids.
- Seasonal problems:
Another important factor contributing to the cement scarcity crisis is seasonal setbacks such as early-onset or extended monsoons, especially in southern India which accounts for the bulk production of cement.
- Labour problems:
India is a labor surplus country and a large chunk of its cement industry still prefers labor deployment over investing in the latest and cutting-edge automation technologies in the cement industry.
- Logistics issues:
Despite huge industrial growth to cater to the demands of the skyrocketing population, the supply chain of cement faces an uphill task in visibility and ensuring well-developed logistics infrastructure in comparison to other developed nations. The prime cause behind the problem is that most cement manufacturing units are located in remote clusters in areas where it makes them make easily accessible to raw materials and also better suit environmental requirements.
- Pollution woes:
More cement production means more pollution. Environmental issues are too many nowadays as climate change, global warming takes center stage in all spheres of debates. It is an even more serious issue in cement industries because the cement sector is the third largest industrial source of pollution. Cement companies emit more than 5 lakh tons of poisonous gases of sulfur dioxide, nitrogen oxide, and carbon monoxide per year. The highly energy-intensive industry is responsible for 8 percent of global emissions too. Given this, global bodies are now pushing for fast innovation and the adoption of greener alternative cementitious materials instead of cement. As per a WWF report, the global cement industry can avoid up to 90% of emissions with its own tools available to reduce carbon footprint while continuing its forecast growth.
- Price conundrum:
The demand for cement is rising each day, especially with the government’s massive push for infra development, housing, commercial, and industrial constructions. The cement demand in India is also estimated to touch around 420 MT by FY 2027 on the back of expanding demand of different sectors. In the Year on Year analysis, cement consumption in India has continuously increased. Statistics indicate that there was an increase in cement use of almost 30 million tons in FY 2022 compared to FY 2021. But the production has been unable to offset the demands. In 2022, the devaluation of the Indian rupee as compared to the US dollar forced cement producers to dig deep into their budgets to pay rising production costs. On the other hand, as they are forced to raise cement prices, it has added to the pain of consumers.