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Why cement sector needs to break out of its concrete cocoon?

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By Sandip Ghose of Birla Corp. Courtesy moneycontrol.com One pic of cement bag.

Cement manufacturers will need to rapidly reinvent their marketing act to compete in a digital marketplace. The more savvy and nimble-footed players will have an edge over their stodgy peers.

Five months after the outbreak of COVID-19 and nationwide lockdown, as the economy is still trying to find its feet, one sector that has given some joy to the markets and investors is cement.

The near-instant bounce back of cement sales in May and June after a virtual washout in April 2020 surprised the manufacturers as much as analysts and industry observers. Various factors have been attributed to the recovery?from pent-up demand to pick up in rural housing post a good rabi harvest and availability of labour in villages, thanks to the returning migrants.

In a parched economic landscape, when people are moving around with magnifying glasses looking for green shoots, concrete – of all things – was found to have gathered some moss. This has been reflected in the buoyancy of cement stocks of both large and midcap companies. The industry players have been expressing "cautious optimism" and predicting a return to the growth path in the next fiscal (2021-22). "Rural demand is likely to help contain the on-year drop in cement sales volume to 12-14 percent this fiscal as against an average annual growth of 6 percent during the last three fiscals," analysts from rating agency Crisil said in an industry research report.

A "V-shaped" recovery was predicted from a sharp contraction of 85 percent in the first quarter to an estimated 7-10 percent growth by the fourth quarter, led by strong rural demand and pick-up in infrastructure activities.

This near-term confidence is based on the assumption of the pandemic blowing over and returning to economic normalcy. However, none of the projections appear to have factored in some of the structural changes that are expected in the post-COVID-19 world.

The Indian cement industry has for long been comfortably numb in the hangover of the "control-raj" days. Stakeholders have historically viewed the industry with the bi-focal lens of supply and demand. The huge headroom in per-capita cement consumption-when compared to economies like China-gave the industry a long runway. The players were, therefore, content to grow in tandem with the national GDP-relying on the natural pull from rapid urbanisation and rural housing.

Cement players, therefore, focused on acquiring limestone reserves and setting up manufacturing capacity to keep pace with demand. To its credit, the Indian cement industry has consistently invested in upgrading technology, being among the best in the world on efficiency and environment parameters.

However, the same focus did not go into product innovation and demand-generation by increasing the use of concrete in novel applications.

Forays into new product forms-such as value-added concrete-were half-hearted given the large rural and "individual home builder" segments, the low hanging fruits as it were. Similarly, there was little attempt to change in "Route-to-Market" or the age-old sales and distribution model.

For increasing footprint and reducing market lead, cement players set up dispersed grinding capacity but comparable investment did not happen in front-end logistics. Bulk transportation, point of consumption storage terminals and packing facilities did not feature in the list of priorities. Even today the standard pack size remains 50 kgs, with high reliance on manual handling at the manufacturing-end and the distribution chain.

Going forward, however, it would be counter-intuitive to believe that disruptions of COVID-19 will spare the cement trade and life will return to the old pre-March 2020 ‘happy days’. There is a general consensus among marketers that contactless delivery and social-distancing norms are here to stay.

It would be a fallacy to assume that these changes will affect only a few sectors like consumer goods and home-delivery services. Therefore, even adjacent product categories such as paints, tile and wood adhesives, water-proofing and construction chemicals are anticipating changes in customer behaviour to impact their businesses. Cement, therefore, cannot remain cosily protected behind a brick and mortar wall, as it were.

Experts have warned that this pandemic may not be a one-time phenomenon. Mankind should expect similar disruptions from both natural and man-made causes. Even in this short period, COVID-19 has taught us that-it has a nasty habit of revisiting in waves. So seasonal surges and localised outbreaks may become a normal feature in the coming days.

This will require the cement industry to rapidly adopt digital marketing and remote working practices. Acquiring technology and digital platforms is going to be easy. The real challenge will be in bringing about the cultural change in organisations steeped in traditional ways of working.

Contactless transactions will be the preferred mode for customers as well as the trade. This will not only accelerate digital order booking and payments but may also trigger a large0scale shift to online portals for the sale of cement.

Manufacturers will need to rapidly reinvent their marketing act to compete in a digital marketplace. The more savvy and nimble-footed players will have an edge over their stodgy peers.

Just like cooking and baking at home, the pandemic will usher a "Do It Yourself" cult among householders. This will require manufacturers to look at smaller pack sizes and product innovations such as quick-setting cement, masonry cement, mortar, ready-to-use concrete mix, bagged concrete and other niche products.

The bigger changes can be expected in construction technology, especially in large projects. Shortage of labour, social-distancing norms and challenges of providing hygienic shelter for workers will encourage contractors to adopt labour-saving practices, automation and use of alternative material such as particle and gypsum boards.

After the pandemic, environmental concerns will again occupy the centre stage. The clamour for reducing the use of cement or replacing it with greener alternatives is bound to increase. Both due to the change in government policy and end-user awareness there will be a greater premium on energy-efficient buildings, green architecture and the use of natural material.

The industry is banking heavily on infrastructure projects. The government has already indicated a willingness to relax the use of bitumen for highways for reasons of cost and speed.

The other area of opportunity that cement makers are looking at is affordable housing. But, to really take off, the definition of affordable housing itself will need to change-through new design, construction material and building technology. It will also require different application skills (beyond basic masonry) that may not be available in the current universe of construction workers.

The pandemic has highlighted the risk of living in congested cities. Given the experience of lockdown, people have turned wary of high rise buildings and housing complexes. With work from home becoming common, there could be reverse migration to the suburbs and smaller towns. This trend will be accelerated by the development of highway infrastructure, air-connectivity and development of ‘rurban’ India.

The cement industry will have to break out of its concrete cocoon and look at changes in the outside world. Production capacity and demand will no longer be the only determinants of success. Size matters. But, strategic foresight and marketing savvy will win the day.

(Sandip Ghose is a marketing professional. He has worked in FMCG, media and cement sectors. He tweets at: GHOSESPOT @SandipGhose)

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Concrete

Jefferies’ Optimism Fuels Cement Stock Rally

The industry is aiming price hikes of Rs 10-15 per bag in December.

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Cement stocks surged over 5% on Monday, driven by Jefferies’ positive outlook on demand recovery, supported by increased government capital expenditure and favourable price trends.

JK Cement led the rally with a 5.3% jump, while UltraTech Cement rose 3.82%, making it the top performer on the Nifty 50. Dalmia Bharat and Grasim Industries gained over 3% each, with Shree Cement and Ambuja Cement adding 2.77% and 1.32%, respectively.

“Cement stocks have been consolidating without significant upward movement for over a year,” noted Vikas Jain, head of research at Reliance Securities. “The Jefferies report with positive price feedback prompted a revaluation of these stocks today.”

According to Jefferies, cement prices were stable in November, with earlier declines bottoming out. The industry is now targeting price hikes of Rs 10-15 per bag in December.

The brokerage highlighted moderate demand growth in October and November, with recovery expected to strengthen in the fourth quarter, supported by a revival in government infrastructure spending.
Analysts are optimistic about a stronger recovery in the latter half of FY25, driven by anticipated increases in government investments in infrastructure projects.
(ET)

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Concrete

Steel Ministry Proposes 25% Safeguard Duty on Steel Imports

The duty aims to counter the impact of rising low-cost steel imports.

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The Ministry of Steel has proposed a 25% safeguard duty on certain steel imports to address concerns raised by domestic producers. The proposal emerged during a meeting between Union Steel Minister H.D. Kumaraswamy and Commerce and Industry Minister Piyush Goyal in New Delhi, attended by senior officials and executives from leading steel companies like SAIL, Tata Steel, JSW Steel, and AMNS India.

Following the meeting, Goyal highlighted on X the importance of steel and metallurgical coke industries in India’s development, emphasising discussions on boosting production, improving quality, and enhancing global competitiveness. Kumaraswamy echoed the sentiment, pledging collaboration between ministries to create a business-friendly environment for domestic steelmakers.

The safeguard duty proposal aims to counter the impact of rising low-cost steel imports, particularly from free trade agreement (FTA) nations. Steel Secretary Sandeep Poundrik noted that 62% of steel imports currently enter at zero duty under FTAs, with imports rising to 5.51 million tonnes (MT) during April-September 2024-25, compared to 3.66 MT in the same period last year. Imports from China surged significantly, reaching 1.85 MT, up from 1.02 MT a year ago.

Industry experts, including think tank GTRI, have raised concerns about FTAs, highlighting cases where foreign producers partner with Indian firms to re-import steel at concessional rates. GTRI founder Ajay Srivastava also pointed to challenges like port delays and regulatory hurdles, which strain over 10,000 steel user units in India.

The government’s proposal reflects its commitment to supporting the domestic steel industry while addressing trade imbalances and promoting a self-reliant manufacturing sector.

(ET)

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Concrete

India Imposes Anti-Dumping Duty on Solar Panel Aluminium Frames

Move boosts domestic aluminium industry, curbs low-cost imports

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The Indian government has introduced anti-dumping duties on anodized aluminium frames for solar panels and modules imported from China, a move hailed by the Aluminium Association of India (AAI) as a significant step toward fostering a self-reliant aluminium sector.

The duties, effective for five years, aim to counter the influx of low-cost imports that have hindered domestic manufacturing. According to the Ministry of Finance, Chinese dumping has limited India’s ability to develop local production capabilities.

Ahead of Budget 2025, the aluminium industry has urged the government to introduce stronger trade protections. Key demands include raising import duties on primary and downstream aluminium products from 7.5% to 10% and imposing a uniform 7.5% duty on aluminium scrap to curb the influx of low-quality imports.

India’s heavy reliance on aluminium imports, which now account for 54% of the country’s demand, has resulted in an annual foreign exchange outflow of Rupees 562.91 billion. Scrap imports, doubling over the last decade, have surged to 1,825 KT in FY25, primarily sourced from China, the Middle East, the US, and the UK.

The AAI noted that while advanced economies like the US and China impose strict tariffs and restrictions to protect their aluminium industries, India has become the largest importer of aluminium scrap globally. This trend undermines local producers, who are urging robust measures to enhance the domestic aluminium ecosystem.

With India’s aluminium demand projected to reach 10 million tonnes by 2030, industry leaders emphasize the need for stronger policies to support local production and drive investments in capacity expansion. The anti-dumping duties on solar panel components, they say, are a vital first step in building a sustainable and competitive aluminium sector.

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