Demand Forecasting of
Cement Industry
AGENDA
• Introduction
• Key drivers for the demand
• Cement Industry Segments
• Demand Forecasting
– Simple Linear Regression Method for demand
forecasting
– Moving average method
• Conclusion
• Recommendations
INRODUCTION
• Global demand of cement rising 4.1% annually
• India is second largest cement producer in the world
• Cement production increased 10.8% year-on-year in
2009-10
• Cement industry is heavily dependent on 3 sectors:
– Coal
– Power
– Transport
• Around 20 big names that account for more than 70% of
the total cement production in India
• The cement industry comprises of 134 large cement
plants with an installed capacity of 173.08 million tonnes
and more than 350 operating mini-cement plants
KEY DRIVERS OF DEMAND
• Increasing Government expenditure
– Increased infrastructure spending has been a key
focus area
– The Ministry of Road Transport and Highways has
planned to invest US$ 354 billion in road
infrastructure by 2012
– FDI up to 100% in the cement and gypsum products
industry
• Increased population and economic growth
– Real Estate
– Rapid Urbanization
– Increased spending in Infrastructure
Region wise demand
Source: CRISIL Report
Key Segments of Cement Industry
Housing
• Tax rebates on housing loans
• Continued growth in population
• Decrease in number of people per
household (average size of
household)
• Rise in disposable income levels
• Lower interest rates and easy
availability of housing finance
Housing
• Investments in housing, like any other
industry, have a multiplier effect on income
and employment
• Home-based economic activities
Infrastructure
• Increasing spends on roads projects due to
greater private sector participation on account of
build-operate-transfer (BOT) projects
• Increased cement intensity in construction of
roads due to the following factors:
*Increase in proportion of concrete roads
compared to bituminous roads
*Use of pavers’ blocks and concrete tiles
*Construction of flyovers
Commercial Construction
• Classified into:
* Office space
* Malls
* Multiplexes
* Hotels
* Hospitals
* Educational institutes
Industrial Investments
• Economic growth of automobile, steel,
textile, and petrochemical industries
• Probable investment of around 10,475 bn
in these sectors in the next 3 years
definitely shows an increased cement
intake from them (around 6%)
Demand Forecasting
Methods Used
Methods Used
Simple Linear
Moving Average
Regression
Simple Regression Method
Demand Forecasting (MT)
Year Housing Infrastructure Commercial Industrial Total
Construction
2010 138.015 47.1667 20.4667 22.8 228.4484
2011 167.7725 41.9167 19.1417 25.35 254.1809
2012 197.53 36.6667 17.8167 27.9 279.9134
2013 227.2875 31.4167 16.4917 30.45 305.6459
2014 257.045 26.1667 15.1667 33 331.3784
2015 286.8025 20.9167 13.8417 35.55 357.1109
Moving Average Method
Demand Forecasting (MT)
Year Housing Infrastructure Commercial Industrial Total
Construction
2010 78.5167 57.6667 23.1167 17.7 177
2011 86.6056 56.2222 23.0722 18.4333 184.3333
2012 92.8074 55.1296 22.2629 18.9111 189.111
2013 85.9765 56.3395 22.8172 18.3481 183.4813
2014 88.4632 55.8971 22.7174 18.5641 185.6418
2015 89.0824 55.7887 22.5992 18.6078 186.0781
2016 87.8407 56.0084 22.7113 18.5067 185
Role in managerial decision
•Appropriate production scheduling
•Selection of suitable purchase policy
•Appropriate price
•Setting realistic sales target for sales person
•Forecasting financial requirement
•Cement companies would be benefited by
their focus on captive power generation
which would help them to reduce power &
fuel cost.
•Domestic cement demand to grow at a
CAGR of about 8.8% in the next two years.
Cement demand in the next year would
largely be driven by low-cost housing
segment in rural & semi-urban regions and
government’s focus on infrastructure
development in the country.
•The level of consolidation in the cement
industry had slowed down in the last couple
of years. However, one analysis suggests
that the Net Present Value (NPV) of a
Greenfield plant is still higher than the NPV of
an acquired unit, leading us to the conclusion
that further consolidation in the industry is still
away.
