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Feature | March 2014

Chemically correct

 It is expected that the government's plan of investing $1 trillion on infrastructure during the 12th five year plan will boost the construction chemicals segment. PROJECTS INFO explores this sector.

The Indian construction chemicals market has shown a strong growth rate of pproximately 17 per cent per annum due to heavy construction activities in the country, especially related to infrastructure. The construction chemicals market in India has grown from Rs 1,400 crore in 2007 to approximately Rs 3,600 crore in 2013 and is expected to grow close to 16 per cent p.a. for the next few years. This will primarily be driven by improving awareness of usefulness of construction chemicals, emphasis on infrastructure and the new National Manufacturing Policy, which aims at increasing the share of manufacturing in GDP from present 16 per cent to 25 per cent by 2022. Moreover, the government's plan of investing $1 trillion on infrastructure during the 12th Five Year Plan would also have a significant positive impact on demand of construction chemicals.

Speaking about the Indian market, Filip Roscam, Creative Design Expert (Germany), Merck India Ltd (a leader in construction chemicals), said, "The Indian market is strong growing market for the company."

Construction chemical are specialty products that are used in structures to increase their life, and also to impart additional protection from environmental hazards. The entry of foreign construction companies and use of foreign technologies makes good awareness of the importance of construction chemicals this has thus enabled some changes in the mindset of Indian customers.

Deepak Parikh, Vice Chairman and Managing Director, Clariant Chemicals (India) Ltd (a provider of speciality chemicals), said, "The speciality chemicals industry in India is expected to more than quadruple in the next decade and Clariant sees India as a robust market for speciality chemicals."

According to a Tata Strategic report on Indian chemical industry, Indian specialty chemicals market is currently valued at approximately $23 billion and has shown a strong growth at 14 per cent per annum over the last five years. Estimates show that Indian specialty chemicals market has the potential to reach $60-70 billion by 2020.

However, the industry is evolving fast by adapting the latest trends to drive the usage of construction chemicals. Constructions especially in metro cities are using ready-mix concrete to achieve faster and better performance. Silicone-based products are also gaining popularity in the market. Green chemistry is also playing a role. Development and application of eco-friendly construction chemicals is also emerging as a new trend in the market.

Opportunities
SAARC countries:
The SAARC countries lack the well organised construction chemical industry. This is a great opportunity for the Indian construction chemical industry to target the SAARC countries for the penetration of their products in the country.

Exports: The cost of manufacturing is low is India as compared to that of the western nations. Also the organised player not compromise in the quality and hence there is a good opportunity to target the other western nations where the construction activity is increasing.

Low labour cost: The labour cost in India is lower than that of in the western nations. If the labours are endowed with better skills the cost of production can be decreased.

Foreign direct investments: The government's decision to introduce hundred percent FDI in construction industry has opened a great opportunity for the industry growth. The overseas organisations will improve the quality of construction and hence will increase the use of standard construction chemical applications in the construction industry to give better quality of construction work products.

Expenditure in construction sector: The government has increased the outflows for the construction activities of the country. The huge projects like National Highways Development Project (NHDP) and the Pradhan Mantri Gram Sadak Yojana (PMGSY) has brought a good opportunity for the Indian construction chemical industry.

Foreign players' entry
The good news is that the foreign players are coming to India in huge numbers, developing the technical know-how. The Asian market has been considered as a huge developing market by all the global players. The infrastructure segment in India foresees a wide scope of development and is evident with many R&D labs and manufacturing plants being put up by various global manufacturers. However, easy adaptability to foreign technology and the entry of foreign companies in the construction industry have helped to change the mindset of the people.

With the view of expanding the base in foreign countries, Ardex Endura India, a 50:50 joint venture between Germany's Ardex group and Prism Cement Ltd, commissioned its Rs 43 crore plant on the city's outskirts to manufacture tile fixing adhesives.

Roscam from Merck India said, "The company doesn't have a manufacturing unit in India; however, we have three manufacturing facilities in the world. We might not open a new manufacturing unit in India, as we think the three facilities will be enough to serve the overall demand."

Challenges
The construction chemicals industry is fraught with various obstacles that prevent it from realising its true potential. Evidently, the primary area of concern is a general lack of awareness in industrial circles that still espouse anachronistic methods of construction. The sector is also plagued with an apparent lack of technical personnel in the marketing department of various. Hence, it has led to the industry not emphasising much on marketing activities.

"Skilled labour is still a problem with construction industry. But we do give a lot of training to our labours or skilled technicians or you can say our supervisors and engineers. Yes we have a complete different segment for these things. We have our construction contract division, we have intelligent and professional engineers and supervisors in our team along with the labour, skilled labour you can say. So we do trainings and work shop for them periodically," says Sameer V Gurav, Assistant Manager, Marketing, Choksey Chemicals. The repercussion results in improper customer services. Sometime it is difficult to get the skilled labour for the industry processes.

According to a few developers, especially those into real estate activities feel that the use of construction chemicals increases the cost to the developers by two to five per cent. Also they claim standard products are costlier than that of sub standard products which is an absurd claim since such a cost cutting exercise would hamper the long term prospects of infrastructure in the country owing to the sub standard material beings. Moreover construction chemicals are value-adding inputs for the construction industry. The chemicals add value or improve the productivity of the structures or works. So there is not necessary to use the products. Even if the chemicals are not used the projects can be developed. However these chemicals greatly enhance the connectivity while reducing maintenance costs since the structures are more stable.

According to the Construction Chemicals Manufacturers' Association (CCMA) the sector, with 300 companies operating have only four to five major players accounting more than 40 per cent of the market share. CCMA felt the dire need to bring all the manufacturers together to increase awareness which will enhance the overall growth of the industry. "Most personnel engaged in the construction industry are not aware of the concept of construction chemicals. They are not aware of the productivity improvement and value addition for the construction works if the chemicals are used on proper time and in proper manner," says a chemical specialist on condition of anonymity.

The introduction of sub standard products manufactured by the small players for the sake of making sound profit is spoiling the industry growth. The users using sub standard products don't get the results by the applications, developing unfavorable perceptions in the customers as well as end users for the future growth of the industry.

"The industry also faces challenge of environment regulations. "The government is passing laws to conserve the environment. These regulations if not maintained by the industry can hamper the growth of the industry," feels Milind Deshpande, an independent chemical specialist and consultant.

BASF, a major player in India echoed the view of Deshpande. According to BASF, most of the products were not covered by Indian codes. The role of the government as well as the Indian players is to work together to come out with some codes covering the construction chemicals.

For CCMA, the most important improvement for this industry would be standardization of construction chemicals. "Today in India the end users are not skilled in the application of these chemicals. So they require a technical guidance to develop the skills required for the application," opines Chand Singh Champawat, Director, Rajlaxmi Chemicals.

Since India does not have BIS standards for all these materials hence there is resistance in government sector to use these materials in bulk. This can be improved by introducing BIS codes for commonly used construction chemicals. Government can also adopt international codes of practice like ASTM/EN, etc., to hasten process.

Apart from introducing codes for the sector, experts felt the need of introducing regulatory body. The body will determine the quality of construction, especially in the building projects segment; non-insistence of banks and insurance companies to ascertain the quality of the assets that they finance/insure unlike in several advanced countries, Indian codes of practice not in line with ASTM/DIN standards as far as usage of chemicals is concerned.

Positive outlook
Construction chemicals market has a huge growth potential due to the construction and manufacturing boom in India. Many newly developed products give better performance and results and hence there will be a shift in demand towards products offering better performance. Value added product such as PCE admixtures, silicon caulks, specialty cement additives, polymer based grouts and mortars and many other such products are going to influence the market in coming years. Innovation and application based R&D will play a critical role in success of companies going forward and companies which provide products suited to Indian needs with optimum price performance ratio are likely to benefit in the long run.

   

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