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Amid the ongoing economic recovery in the Asian market, the demand for construction materials has also increased significantly across the region. Different government institutions, including in China and India, have announced various measures and increased spending on infrastructure and residential construction projects. These announcements are only adding to the growing demand for cement over the next 12 months.
In China, the reopening of the economy is projected to lead the construction market in the Asian construction industry. The government has infused billions of dollars into the struggling Chinese real estate industry and also announced policy measures to boost housing sales. With China being the largest cement-consuming country in the region, the revival of the Chinese construction market will also drive the growth recovery for the cement sector in 2023. In India, as well, the government has announced an investment of INR 10 trillion towards the development of infrastructure in the 2023-24 Union Budget.
As part of the infrastructure push and the subsequent positive impact on other construction-related industries, cement manufacturers in India have been on a capacity expansion spree over the last few quarters. For instance,
UltraTech Cement, for instance, has announced the plan to increase its capacity to 159 mtpa by FY 2025. It means that the firm will have an additional 42 mtpa capacity over the next few years. Shree Cement, on the other hand, also announced the plan to boost the production capacity by an additional 3.5 mtpa. With an investment of INR 35 billion towards the expansion project, the firm is targeting a higher market share in the cement market.
Dalmia Bharat also announced an investment of INR 90 billion to boost its cement capacity to over 48 mtpa by FY 2024. This represents a growth of more than 12 mtpa from the current 36 mtpa. As part of its expansion strategy, the firm also acquired the stressed asset of 9.4 mtpa of Jaiprakash Associates. JK Cement, another cement manufacturer in the country, announced an investment of more than INR 11 billion for increasing its cement production capacity by 5.5 mtpa, from the current capacity of 20 mtpa. JSW Cement also announced an investment of INR 32 billion for setting up a new cement plant in India.
The demand for cement is also projected to increase in the Southeast Asian markets over the next three to four years. Currently, markets like Cambodia are able to meet the majority of their cement demand through local production. However, from the short to medium-term perspective, ConsTrack360 expects firms to expand their production capacity in Cambodia. According to Cambodian Cement Manufacturing Association, the country is able to meet 90% of the demand through local production, whereas 10% of the demand is met through imports from countries such as India, Vietnam, and Germany.
Over the next 12 months, the cement capacity is also projected to grow at a modest rate in the Vietnamese market. The recovery in the regional construction market will keep driving capacity growth in the Southeast Asian market over the next three to four years. While cement firms have faced a difficult growth year in 2022, amid rising inflation and prices, the outlook for the cement industry remains strong over the next three to four years. Along with the infrastructure and residential construction market, spending in the commercial construction space will also lead to the growth recovery for cement manufacturers in the Asian market from the short to medium-term perspective.
