Why is Holcim exiting India and what it means for Cement prices?

cement prices

Holcim India has announced to exit India. Its decision has surprised the industry as it formed more than 20% of the national capacity and sales volumes. Besides, amongst geographies, India also makes up 23% of the total global capacity of the company and contributes 27% of sales volumes. However, the company has been divesting in several emerging markets, in line with its ‘Strategy 2025 – Accelerating Green Growth’. Holcim is looking to move away from cement production, a sector responsible for significant pollution, and move into innovative and sustainable building solutions. Meanwhile, the race to acquire Holcim’s assets in India has heated up as several companies are looking to acquire Holcim’s 63% stake in Ambuja and 5% stake in ACC. Ambuja also holds another 50% in ACC Cement. Currently, Holcim is in talks with JSW Cement and the Adani Group, for a deal which may amount to USD 10 billion. The prices of cement could see downward pressure, as supply may exceed demand when the new owners of the Holcim’s assets try to leverage and increase the capacities. On the contrary, the cement market is also likely to become concentrated in the hands of a few players, and therefore, oligopolies can keep prices relatively more stable. Indian cement sector has been probed in the past for cartel formations, as the Competition Commission of India (CCI) had levied an INR 6,000 crore fine on 10 companies in 2010 and INR 6,700 on 11 companies in 2016. So, the chances are high that prices would remain stable rather than plummet.

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