this year, the number of COVID-19 cases in India went straight to 7 million, surpassing Brazil to become the second largest country after the United States in COVID-19 cases. The BBC reports that India is heading for its biggest recession since independence. India's economy contracted by 5% between 1979 and 1980. In the first quarter of 2020, India's economy contracted by 23%. For the whole year, the economy is expected to contract by between 3% (optimistic) and 10% (pessimistic). As in other countries around the world, the epidemic has completely disrupted business and other aspects of life in India, causing millions of people to lose their jobs. In the beginning, India adopted the strictest lockdown policy in the world. As the report said, "This has a huge impact on the poverty alleviation of a large number of people in India and the ability of the younger generation to obtain employment.".
The McKinsey Global Institute estimates that India will need to create at least 90 million non-farm jobs by 2023 to absorb all of its young workers. This means that to achieve this goal, India's economy needs to grow by at least 8.0% to 8.0% after the COVID-19 epidemic has passed.
McKinsey said that India has 12 to 18 months to carry out a series of structural reforms in health care and banking, and take measures to improve the flexibility of the labor market. In an interview with local media, Sanjeev Sanyal, chief economist of the Indian Ministry of Finance, said that India was ready to build infrastructure on an unprecedented scale and allow India's debt-to-GDP ratio to increase by several percentage points, thus returning the economy to the growth track. Prime Minister Narendra Modi and his government have a lot of business to attend to besides dealing with a raging epidemic. In September
2020, Fitch Ratings said in a report that as more than 65% of India's cement demand is driven by the real estate market, the weak real estate market and the slow construction cycle are expected to lead to a decline of more than 15% in India's cement consumption this fiscal year. Although the demand from infrastructure construction and rural housing construction tends to be more elastic, this situation still exists. At the same time, steel demand is also expected to decline by about 10%, also due to the weakness of the real estate market.
Contraction and rebound
As mentioned earlier, India's GDP contracted by 23% between April and June. Recent data from financial services companies suggest that the economy will continue to shrink, although the magnitude may vary. Goldman Sachs expects India's economy to contract by 14.1% in the fiscal year and rebound strongly in the next. If continuous growth remains at normal levels, the average annual growth rate is expected to reach 15 by March 2022. Two other financial institutions, India Ratings and Fitch Ratings, also released relatively pessimistic data. India's ratings agency expects the economy to contract 11.8% this fiscal year and rebound 9.9% next, while Fitch expects the economy to contract 10% this fiscal year. As expected, there will be inevitable changes in global finance and economy. But there is a consensus among these institutions that the economy will rebound strongly in the next fiscal year. The highway
to the future In September, Construction Week Online reported that India's construction sector is expected to shrink by about 15%, which is far from the worst. But the report also mentioned that analyst firm GlobalData expects India's construction sector to rebound by 11 in 2021 due to a low base and backlog of demand. Construction growth will also be driven by other factors such as investment in the national infrastructure plan. Including the recently announced comprehensive plan for affordable rental housing and the Prime Minister's investment in India's vision of self-sufficiency. It also suggests that the Indian construction industry will benefit from a supply chain shift from China to the world, with India offering a large monopolistic market and cheap labour costs.
In the same month, Prime Minister Narendra Modi laid the foundation for nine high-speed projects in Bihar, as well as the "Bihar High Fiber Optic Cable", an Internet service project for all villages in Bihar. Bihar is one of the States that have benefited the most from the development of infrastructure construction. Modi said, "In formulating the road development plan for Bihar, the Indian government has given due attention to the construction of bridges over the river.". As a result, 17 bridges are already under construction. We are working to develop an Indian intermodal transport system.
According to a series of plans initially mentioned by the Prime Minister in 2015, there are about 3,000 kilometers of national highway plans. In Bihar, five road projects are under way to connect the eastern and western parts of the country, and six more are under construction to connect north and south India. Progress in the
Cement Industry: Facts and Figures
It is worth noting that India is the second largest cement producer in the world after China. The Indian Board of Directors Equity Foundation (IBEF) mentioned in its recent monthly "Analysis of the Indian Cement Industry" that in 2019, India's cement production capacity reached 5. At the time of writing this report, there were about 210 cement plants with a total capacity of 410 million tons per year, while the total capacity of 350 small and micro cement plants was only 1. 77 are located in Andhra Pradesh, Rajasthan and Tamil Nadu. India's eastern region has also attracted a lot of investment. IBEF believes that in the next ten years, India could become a major player in the Middle East, African and other developing countries export cement and due to the growth of demand in real estate, commercial and industrial buildings.
In the structure of cement demand in India, real estate accounts for about 65-70%, including low-cost housing, and infrastructure accounts for about 20-23%. The remaining demand for commercial and industrial buildings accounts for 10%. Ramco Cement is pushing ahead with its expansion in eastern India
, Harsha Jethmalani reported for Livemint Business News. There has been a lot of capacity growth in the region, and analysts are concerned about future price pressures. The management of Ramco Cement recently reported that their asset investment plan has been progressing smoothly recently, despite a slight delay due to the epidemic. Its expanded clinker production capacity in Jayanthipuram and Kurnool areas of Andhra Pradesh will be officially completed next year. The grinding capacity in Andhra and Odisha will be completed in 2022. The production capacity of Ramco cement will increase from 16.5 million tons per year to 20.5 million tons per year. Among
the remaining cement companies, Shree Cement and Dalmia Bharat have also increased their attention to the eastern part of India. Analysts estimate that eastern India will see capacity growth of 30-35% in the next 18 months. The total production capacity of the region is expected to reach 1 by the end of fiscal year 2022. Harasha Jethmaiani said that it is noteworthy that, like the southern region, the eastern region will eventually face the situation of overcapacity, and the market price of cement will not be optimistic.
In August, Aditya Birla Group President Kumar Mangalam Birla announced that its Ultratech Cement unit would increase its annual production capacity from 118 million tons to 1. Chaoke Cement plans to spend 15 billion rupees on capital expenditure. According to the Economic Times, these capital expenditures will cover investments in many areas, including the installation of 66 MW waste heat recovery systems in West Bengal and Bihar, the tentative second phase of the grinding plant project in Uttar Pradesh, new ready-mixed concrete equipment and so on. Green energy will exceed 185 megawatts, and solar and wind energy will exceed 350 megawatts. In addition, Birla Group is planning to expand its grinding capacity at Durgapur. The capacity expansion also includes the installation of 240,000 tons/year of voltage regulation modules. After the completion of construction, the total capacity of the plant will reach 1.5 million tons per year.
The Kumar Mangalam Birla said that, on the instructions of the government, the embargo on the issuance of COVID-19 had led to the suspension of operations in various places, but that operations had restarted under a series of standardized procedures. He said that the fiscal year will be a challenging year, but there are very clear growth expectations for the next fiscal year, and he is confident that the growth of the group's performance in 2022 will be 6% -8%.
In an interview with Livemint, Parth Jindal, managing director of JSW Cement, mentioned the slump in cement consumption in India from 2019 to 2020. The launch of JSW cement was delayed by two years. During this period, the company will increase its production capacity from 14 million tons per year to 20 million tons per year. The company's main market is located in the Mumbai metropolitan area in southern India and parts of eastern India. The State Level Single Window Customs Authority (SLSWCA) has approved the expansion of JSW Cement's grinding capacity at Kalinganagar from 1.2 Mtpa to 2.4 Mtpa.
Dalmia Bharat has finally completed its acquisition of Murli Industries. The company has a 3 Mtpa plant in Chandrapur area of Maharashtra. This will give Dalmia access to markets in three more States: Telangana, Madhya Pradesh and Chhattisgarh. Livemint reported that the acquisition means that Dalmia is expected to reach 37 million tons of annual production capacity by fiscal year 2022 and become the third largest cement producer in India.Earlier
this year, Dalmia said India's cement industry, which has been hit hard by COVID-19, would rebound on the government's push for major infrastructure and housing projects. Amid reports of lacklustre output and negative GDP growth, the group expressed optimism that it could grow stronger thanks to innovation-related cost-cutting, marketing and so-called "gentrification". The company will pay more attention to the construction of digital and remote control factories.
In the past few years, Dalmia has been expanding in various ways, continuously consolidating its position in the eastern part of India and increasing its presence in the western part. The company confirmed that it was expanding its brownfield capacity in eastern India by 7.8 million tonnes and pledged to achieve negative carbon emissions by 2040.
At this year's Climate Week Summit in New York in September, Dalmia and five industry leaders signed an "Industry Agreement for Near-Zero Emissions in 2050.". The other four companies that signed the agreement are Siemens Energy India, Thermax, Shell Group of Companies India and Tata Consulting Engineers. As the sponsors of the agreement, these industries and companies are committed to achieving the goals of the Paris Agreement by improving energy efficiency, renewable energy, economic cycle between member companies and supply chains, and other measures. As Photovoltaics Magazine put it, some "hard-to-regulate" industries, namely cement and aluminum, are crucial in the agreement, and these industries need to shift to 100% renewable energy and raw materials to achieve breakthrough processing technology.
Outlook
Three months ago, the Economic Times reported that the cement industry would experience a V-shaped recovery, from an 85% drop in April to a 7% -10% growth in the fourth quarter of the fiscal year, according to Crisil. Cement demand is expected to decline by 12% in FY2021 and rebound in FY2022. 11. Nitesh Jain, director of Crisil, pointed out that in order to maintain liquidity, cement companies are likely to reduce capital expenditure by 30 to 40% during this period. Although cement producers have been eager to grow recently, the cement industry is relatively stable, and large-scale mergers and acquisitions are unlikely to occur.
Another credit rating agency, ICRA, expects the added value of cement production capacity in fiscal year 2021 to be around 14 million to 15 million tons, compared with its earlier expectation of 20 million tons. This is mainly because most companies have slowed down the expansion of production capacity, choosing to maintain the liquidity of the company in the face of reduced demand. As mentioned above, many companies have announced deferrals of their capital expenditures. Another challenge facing the
cement industry is urban demand, which is a problem brought about by the recent blockade. Infrastructure investment will be delayed as the government prioritizes the fight against the epidemic, especially after considering the financial constraints of local governments, as the Construction Times said. It is expected that the impact of the epidemic on construction activities will be mainly in the first quarter of fiscal year 2021, mainly from the impact of labor, raw materials, logistics and other aspects caused by the quarantine blockade. The economic recovery will be a gradual process, and it may take several quarters to return to normal.
Epilogue
The year in which the COVID-19 epidemic has hit the economy is about to turn the page, and India has suffered some unprecedented shocks. Since September, India has had more than 90000 confirmed cases per day, surpassing Brazil and coming only a short distance from the United States. The country's economy declined in the first quarter. 23. Although the cement industry has been affected by the previous lockdown and quarantine, it is now showing signs of recovery. Rural cement demand will be boosted by higher farmers' incomes, better-than-expected monsoon weather and the construction of low-cost housing. The government has very important plans for infrastructure, especially highways and transport. With better luck, many aspects of India will return to normal in 2021.
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