Commodity SECTOR IN INDIA (Overview)
Overview
Commodity sector in India mainly consists of Chemicals, Construction Materials (mainly cement), Metals & Mining, and Forest Materials products including Paper, Forest &
Jute Products. In this blog post, we’ll try to get an overview of each industry one by one.
Chemicals Industry Overview
India's chemicals industry is a significant contributor to the country's economy and is expected to contribute $300 billion to India's GDP by 2025. The industry covers a wide range of products, with a market size of $178 billion in 2018-19, expected to grow to $304 billion by 2025.
India holds a strong position in global chemical exports and imports, ranking 14th in exports and 8th in imports (excluding pharmaceuticals). Alkali chemicals and polymers are major components of India's chemical production, with alkali chemicals accounting for around 71.9% of total production from April to July 2021.
The specialty chemicals sector in India is experiencing significant growth, with Indian manufacturers recording a CAGR of 11% in revenue between FY15 and FY21. India's share in the global specialty chemicals market has increased to 4%. The industry is expected to see a 50% YoY increase in capex in FY22 and a revenue growth of 19-20% YoY.
India is a major player in the exports of dyes, accounting for 16% of global production. Agrochemicals and petrochemicals are also important revenue components for India, with agrochemicals accounting for 50% of total production and petrochemicals consumption reaching 22 million tonnes in 2019-20.
The government of India supports the chemicals industry through initiatives such as reducing customs duty on imported products and promoting the 'Make in India' campaign. The industry has attracted strategic investors from countries like Japan, Korea, and Thailand, looking to diversify their supply chains from China.
To further boost the sector, the government has set a vision for 2034, focusing on improving domestic production, reducing imports, and attracting investments. The government plans to implement production-linked incentive systems and create a manufacturing ecosystem through the growth of clusters.
In summary, India's chemicals industry is a vital part of the economy, with a strong global presence in exports and imports. The specialty chemicals sector is witnessing significant growth, and the government is taking initiatives to support and enhance the industry's performance. With immense growth potential, the sector offers attractive investment opportunities for both domestic and international investors.
Construction Material Industry Overview
Construction Material industry mainly consists of Cement Manufacturing companies in India. Cement is a key ingredient for construction and infrastructure development.
India is the second-largest producer and consumer of cement in the world, after China. It has a production capacity of about 550 million tonnes per annum (MTPA) and a consumption of about 350 MTPA.
The demand for cement is driven by the growth of sectors such as housing, urban development, roads, railways, ports, airports, power, and irrigation. The demand is also seasonal, with higher demand in the post-monsoon period (October-March) and lower demand in the monsoon period (June-September).
The supply of cement is determined by the availability of raw materials, coal, power, transport, and logistics. The supply is also regional, with higher concentration in the southern and western regions of India.
The costs of cement production include raw material costs, power and fuel costs, freight and logistics costs, and taxes and duties. The costs vary depending on the location, type, and efficiency of the plant.
The prices of cement are influenced by the demand-supply dynamics, the level of competition, the government policies and regulations, and the bargaining power of customers and suppliers. The prices also vary depending on the region, type, and grade of cement.
The competition in the cement industry is intense, with over 50 players operating in the market. The industry is consolidated at the top, with the top 10 players accounting for about 70% of the market share. The industry is also fragmented at the bottom, with many small and medium players catering to local markets.
The segments of the cement market include residential, commercial, industrial, and infrastructure. Each segment has different drivers and challenges depending on the nature and scale of the projects.
Metals & Mining Industry Overview
India holds a significant advantage in the production and conversion costs of steel and alumina. Its strategic location enables export opportunities to develop, especially in fast-developing Asian markets. As of FY22, India had an estimated 1,425 reporting mines, with 525 mines reporting metallic minerals and 720 mines reporting non-metallic minerals.
Minerals are precious natural resources that serve as essential raw materials for various industries, and the growth of the mining industry is crucial for the overall industrial development of a nation. India is blessed with abundant reserves of both metallic and non-metallic minerals, which serve as a foundation for the expansion and advancement of the country's mining industry. India is largely self-sufficient in metallic minerals such as bauxite, chromites, iron ore, and lignite, as well as mineral fuels like coal and lignite. The mining industry has the potential to significantly impact GDP growth, foreign exchange earnings, and provide a competitive edge to end-use industries such as construction, infrastructure, automotive, and electricity generation by ensuring the availability of essential raw materials at reasonable rates.
The rise in infrastructure development and automotive production is driving the growth of the mining sector in India. Additionally, the power and cement industries are also contributing to its growth. Given the strong growth expectations for the residential and commercial building industry, the demand for iron and steel is expected to continue rising.
