In the past few years, a slew of new entrants have made a foray into the cement industry. Interestingly, this is not limited to companies belonging to sectors having synergies with cement, such as steel and power. New entrants also include diversified industrials as far apart as oilseeds, fast-moving consumer goods and shipyards. However, what could make survival challenging for new entrants is the fact that demand revival has taken longer than expected and costs are escalating. Rising costs, particularly input cost and freight, among others, continue to erode margins of larger incumbents. Also, newer cement makers will have to incur additional funds on advertising and branding, thus weighing on their overall cost structure. Though auctioning of limestone mines has picked up pace in the recent past, the price at which some of them are sold is not cheap by any means, say analysts. Meanwhile, cement prices across the country have seen a seasonal correction and are expected to remain under pressure given the slump in demand. In such a scenario, it will be certainly difficult for newer entrants into the industry to pass on increased costs to consumers, especially given that even established companies have not been able to do so.

(Live Mint)