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India cementing another advantage over China amid divergent fortunes of two Asian giants


From economic growth prints to the shift in supply chain, two Asian heavyweights – India and China – have divergent tales to narrate; one cheering a rise and another striving to arrest the fall.

Amid a trade war with the US and other factors, China, claimed to be world’s factory floor, is increasingly losing exports and seeing a dip in production of various items ranging from wines to iPhones. Meanwhile, India’s economy has made a strong recovery from the challenges caused by Covid-19, despite ongoing global economic difficulties. On the contrary, China’s economic growth is expected to ease amid many challenges, including troubles in its once-booming real estate sector; prompting many investors to drive away their bets to India.

Also Read: ‘India grows, China slows’ narrative plays out

The property sector crisis of China is a huge load on its economy and is looking for a rescue. China’s main problem revolves around the collapse of its property market. Many prominent developers in China have struggled to complete their projects and are burdened with an enormous amount of debt that they are finding increasingly difficult to repay or refinance.

China’s property crisis is in tandem with the rise and struggles of China Evergrande and Country Garden, two of the largest developers in China, which amassed a collective debt burden of around $500 billion and are under severe stress now.

So, here is another area where India is looking cement some gains while China stays on the losing side. In what may make Adani and Birla happy is a forecast that India’s demand for cement, crucial for property development, will see steady growth, while the same might stay low in China in 2024 due to troubles in the property sector.Also Read: India taking the Dragon head on & dimming lights of ChinaTo be sure though, profit margins of cement producers in China could stabilise, while the quicker increase in production capacity might restrict the improvement of profit margins in India, Fitch said in a note.

Divergent cement demand in India & China

Fitch expects China will continue to see less demand for cement because the problems in the property market will continue, and the building of new infrastructure will not happen as quickly. The investment in properties is expected to stay low because developers are still struggling to sell properties and have limited money available, it added.

“Stress in the property market has also adversely affected local governments’ financing conditions amid sliding land sales, which will constrain their ability to boost spending on infrastructure projects,” Fitch said.

Investments in road construction in China went up by only 0.7% on year in 2023 and spending on municipal facilities dropped by 1.2% in the first nine months of 2023. This is a decline from the growth of 2.5% and 12.8% seen in the previous year, respectively. Property investment also decreased by 9% during the same period. Moreover, there was an 8% drop in cumulative property sales measured by gross floor area (GFA), and GFA starts fell by 23% compared to the same period in the previous year, Fitch noted.

Housing and infrastructure are key end-markets for the cement industry.

End market

Fitch now expects the reduction in cement production capacity in China in 2024 to lead to the exit of smaller producers experiencing financial losses.

In contrast, Fitch expects India’s consistent growth in GDP to lead to an annual 6%-to-8% rise in cement demand in the coming years. The need for cement in infrastructure and affordable housing sectors will increase even more rapidly due to the government’s increased spending in these areas.

Housing sales in value and volume were hit record high across seven major cities in India in fiscal 2023 and housing sales were seen to break three-year record this festive season. Amid growing wealth of Indians, ultra-luxury homes hit record high sales in 2023. Home buying affordability will also get better in 2024, according to a report by JLL India on the Home Purchase Affordability Index (HPAI). This expectation is based on the projected repo rate cut of 60-80 basis points throughout the year.

India is seen to be at the brink of its second phase of increased capital expenditure (capex). There’s also a significant surge in housing activity in the country. Even looking at the markets as an indicator, the Nifty Realty Index has surged by 65% in the last year, surpassing 13% gain in the Nifty 50 index.

Fitch expects urban housing activity to continue to recover in 2024 from multi-year lows, despite moderation from 2022-2023 levels.

Annual new capacity additions in the next five years are likely to double, but steady demand growth will help maintain capacity utilisation in the industry, it added.

The rating agency also expects more mergers and acquisitions in the Indian cement industry that will result in more consolidation.

Recently, Ambuja Cements completed the buyout of Sanghi Industries and Ultratech Cement, India’s largest cement manufacturer, acquired 10.8 MT capacity of Kesoram Industries. Earlier, Adani Group had made a large acquisition of Holcim’s 67.5 million tonnes (MT) cement assets. An Adani group entity, Sajjan Jindal-owned JSW Cement, and ArcelorMittal Group are likely contenders to buy Vadraj Cement, an ABG Shipyard group company that will be sold under the Insolvency and Bankruptcy Code process.

In India, Aditya Birla Group, which owns Ultratech Cement, stands as the country’s largest cement manufacturer, boasting a manufacturing capacity of 137.5 million metric tonnes per annum (mtpa). ACC and Ambuja Cements, both owned by the Adani Group, are next and they have a combined capacity of 67.5 million metric tonnes.


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