India's Cement Overcapacity Reaches 150 Million Tons

2018-12-18 15:00:56

With the growth of production capacity, India's cement surplus is becoming more and more serious. In 1950, the national capacity utilization rate was 83.3%, and now it has dropped to 67.9%. The excess capacity is 148 million tons.

India: Soaring economy, grotesque wealth gap

the Republic of India, independent from British colonial rule since 1947, is the world's second most populous country after China, with a population of 1.32 billion in 2016. According to the International Monetary Fund (IMF), India is the sixth largest economy in the world, with a GDP of $2.6 trillion in 2017. However, due to its large population, GDP per capita ranked only 122nd at $7,174. India's economy,

traditionally dominated by agriculture, is now skewed towards services, which account for 61.6% of GDP. Industry accounts for 23% of GDP, while agriculture accounts for only 15.4%. However, the labor force structure is still dominated by agriculture (47%), with 22% and 31% of the population in industry and services, respectively.

Although India's economy has grown nearly six-fold so far in the 21st century (Figure 1), the gap between rich and poor in India is very large. In 2017, India ranked only 135th (out of 197 countries) in terms of income equality. As of November 2016, India's top 1% owned 58.4% of the country's wealth, and the top 10% 80.7%.

Figure 1: Comparison

of India's GDP, GDP per capita, cement production and population growth in the 21st century Source: World Bank. USGS

Cement Capacity and Output: Rapid Growth

after the 1980s India's first cement plant was located in Borbandar, Gujarat, which was built in 1912-1913 and put into operation in 1914, 33 years before independence. Its annual production capacity is only 10000 tons. After that, the production capacity increased steadily, reaching 6 million tons per year in 1950, 9 million tons in 1960, 19.8 million tons per year in 1970 and 25.5 million tons per year in 1980. After

independence, the government took control of the cement industry. Devolution until 1986 led to a surge in new capacity. Capacity more than doubled to 57 million tons/year between 1980 and 1990, and doubled again to 119 million tons/year by 2000. By 2010, production had almost tripled to around 300 million tons. In the seven years to 2017, production capacity increased by nearly 1.5 times to 446 million tons.

With the rapid expansion since the mid-1980s, India's cement production has experienced a similar explosive growth, from 18.6 million tons in 1980 to 42.9 million tons in 1990, 94.2 million tons in 2000 and 213 million tons in 2010. In 2017, it reached 298 million tons. Since 1990, production has increased nearly seven times.

With the growth of production capacity, India's cement surplus is becoming more and more serious. In 1950, the national capacity utilization rate was 83.3%, and now it has dropped to 67.9%. The excess capacity is 148 million tons.

Table: Regional Development Distribution

of Cement Capacity, Output and Utilization

in India, 1950-2017 2-5 shows the state of India by population, cement capacity, limestone, Color chart of cement production capacity per capita (the darker the color, the larger the value). Figure 2 is a population map by state, with Uttar Pradesh, which is not far from New Delhi, the capital of India, having the largest population. It has 205 million inhabitants, almost twice as many as the second-placed state of Maharashtra (112 million) and is located in central and western India. The third and fourth most populous States, Bihar (104 million) and West Bengal (91.3 million) are also in the northeast. Madhya Pradesh (72.6 million) is the fifth most populous state, located between Uttar Pradesh and Maharashtra. The top five States have a population of 480 million, or about 43% of the total. India's least populous States are in the far north and far east, from the northeast to the central south, with a stretch of less densely populated areas running through the country.

Figures 2, 3: Distribution of India's population (left) and cement production capacity (right)

Unlike many major markets, most cement production capacity is not distributed in India's most populous States. This is due to the uneven distribution of limestone production. Of the limestone produced in India in the 2016-2017 fiscal year, 92% was used for cement production. Of the 242.5 tons of limestone produced, 223 tons were used for cement. Combining

Figure 2 (population) and Figure 3 (cement production capacity) results in Figure 4, which represents the per capita cement production capacity of each state. Taking population into account, cement plants in India would be better distributed than they are today. In Figure 4, the most striking exception is Meghalaya, which has a per capita capacity of 2793 kg/person. The national average is about 550 kilograms per capita. Other States with high per capita cement capacity include Himachal Pradesh (1,617 kg per capita), Andhra Pradesh (1,213 kg per capita), Chhattisgarh (906 kg per capita) and Rajasthan (832 kg per capita). The lowest States are Jammu and Kashmir (64 kg), Bihar and Kerala with only 25 kg and 18 kg of cement per capita.

Figure 4, 5: Cement production capacity per capita in India (left), limestone (right)

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With the growth of production capacity, India's cement surplus is becoming more and more serious. In 1950, the national capacity utilization rate was 83.3%, and now it has dropped to 67.9%. The excess capacity is 148 million tons.

2018-12-18 15:00:56

The list shows that a total of 62 construction entities have been announced, including Anhui Conch Information Technology Engineering Co., Ltd. It is reported that Anhui Conch Information Technology Engineering Co., Ltd. is wholly owned by Anhui Conch Cement Co., Ltd.