India Cement & Construction Materials (vol 1 / issue 10)

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Cement VOLume 1

issue 10

JANUARY / FEBRUARY 2013

& construction Materials

By the Numbers

Cement Trade Prices Petroleum Coke Prices

East India

One-Two Punch of Transportation Costs

TDF 30 Years On A Winning Alternative?

News

|

Analysis

Tapping Its Potential

|

Market Coverage

|

Interviews

|

People

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FEATURES 4 10

DEPARTMENTS

THROUGH THE EYES OF AN ANALYST An interview with Ambit Capital’s Nitin Bhasin

EAST INDIA Tapping the region’s potential

1

EDITOR’S LETTER

3

NUMBERS IN BRIEF

16

Strength in Synergy Petroleum coke prices

PROFILES ACC Limited: Building for Tomorrow

FOCUS 8 14

20

40

CEMENT TRADE PRICES CARBON MINERALIZATION: REDUCING CO2 EMISSIONS

24

TDF 30 YEARS ON: A WINNING ALTERNATIVE?

26

VOLUME AND PRICING

27

PEOPLE

THE ONE-TWO PUNCH Cement industry reeling from recent increases in transportation costs

INFRASTRUCTURE & PROJECTS Clearance given for India’s second sea bridge

34

EQUIPMENT UPDATES

36

COAL UPDATES

XCMG unveils 1000-ton lattice boom truck crane Targets for FY 2012-13 set

37

cement

New research may offer short-term fix to curbing CO2

construction & building materials

32

Highlights of the latest in broker recommendations

Prices fall to new lows in 2012

A closer look at this alternative fuel source

23

ANALYST RECOMMENDATIONS

MARKET AND COMPETITION Compat steps into cartelization issue Prices on the rise Lifetime Achievement Award for Holtec’s Chairman

28

PROJECTS AND EXPANSIONS

30

M&A and FINANCE

39

REGIONAL UPDATE

Expansion program completed at Heidelberg’s Jhansi unit Vicat and CCH are looking for more opportunities Lucky Cement eyes Sri Lanka for expansion

CemWeek rOBERT MADEIRA CemWeek diana heeb bivona CemWeek Anthony Fitzgerald BMWeek judy foust BMWeek BMWeek

cemweek publisher head of cw group reasearch

iccm manager

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BULK MATERIALS ACC introduces new cement products

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CBI CONFERENCE

CEMENT BUSINESS & INVESTMENT Mumbai, India October 2013

INDIA

The CBI India 2013 will focus on the various aspects of India’s cement industry from a business growth & investment perspective. Notably, the programme will take a dual-track business and technical approach to the issues around:

GMI

♦

Market perspective, forecast and competitive outlook

♦

Alternative fuels, new business models

♦

Environmental performance management

♦

Finance and capital markets

♦

Coal as mainstay fuel option and outlook

♦

Efficiency, innovation, new developments

♦

Technology, operations and best practices

GLOBAL

Organized by GMI Global and again with the great support from the India Cement & Construction Materials (ICCM) journal the event is expected to bring together more than 200 cement and lime professionals. GMI is excited to build on the success of CBI India 2012 to expand the scope to include participants from the entire South Asia region this time around.

Register for attendance directly on http://www.gmiforum.com/welcome-to-cbi-india-southasia-2013, or contact sales@gmiforum.com. You may also call us in the Us at +1-203-516-7424 supported by

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CEMENT & CONSTRUCTION MATERIALS

letter from the editor

Strength in Synergy reek philosopher Aristotle suggests “the whole is more than the sum of its parts.” When looking at such a large country as India, which is represented by many distinctly different regions, the idea rings true. However, it is important not to forget that each region, in and of itself, has its own identity and function, and it is the unique combination of these identities and functions, which in turn assist in creating a synergy, that lends to India’s strength as a whole.

Some “parts” of India – usually the topperforming economic growth states – tend to dominate discussions. While not in any way “stealing their well-earned thunder,” we wanted to shine a spotlight on other regions and look at how each region’s potential economic growth may play a role in the demand for cement in the short- to mid-term.

The feature, “East India: Tapping Its Potential” is the first in a series of articles that will take a closer look at each region’s economic growth. The potential growth in the eastern region has to a large extent remained untapped. However, recent economic development, largely fueled by infrastructure spending, has many cement companies turning an eye to this part of the country.

Also included in this edition is “Through the Eyes of an Analyst,” an interview with Ambiat Capital’s infrastructure analyst, Nitin Bhasin, who shares his thoughts on the current state of India’s cement market. Bhasin also touches on trends and opportunities for the industry in 2013 and beyond.

In addition to our regularly featured departments, this issue focuses on tire derived fuels. “TDF 30 Years On: A Winning Alternative?” looks at how far this

alternative fuel source has come with regard to usage, and what potential roadblocks it is encountering today. And “Carbon Mineralization: Reducing CO2 Emissions” provides an update on new research that may offer a short-term resolution to curbing the amount of CO2 released into the atmosphere from the burning of fossil fuels.

In closing, ICCM welcomes your input. If you are interested in contributing to the ICCM magazine with an article, or simply want to share your feedback, contact us at editor@cemweek.com.

Diana Heeb Bivona iccm manager

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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www.cwgrp.com T: +1-702-430-1748 F: +1-928-832-4762 848 N. Rainbow Blvd. Box #1658 Las Vegas NV 89107 USA We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48

numbers IN BRIEF

Petroleum Coke Focus Expands Rapidly omestic Indian petroleum coke production almost doubled in the last decade, as it increased from nearly 2.5 million tons in FY 2000-2001 to 4.9 million tons in FY 2009-2010, just to decline briefly to 4.5 million tons the next fiscal year. The industry kept a steady pace in FY 2011-2012, when petroleum coke production closed at 4.5 million tons for a consecutive year.

The takeoff started in April 2012 with monthly domestic output passing more than 0.45 million tons for the first time in its history. New maximum levels followed with the peak volume reached in November 2012 – more than 0.64 million tons in monthly production. As a consequence, the FY 2012-2013 estimated production is expected to boom to around 6.85 million tons.

FIGURE: INDIA PETROLEUM COKE PRODUCTION (MILLION TONS) 8

4

0 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

2011-2012 2012-2013E

Source: CW Group analysis

The impressive growth projection also is reflected in uncalcined petroleum coke imports sourced from the United States. Current estimates show that in 2012 India imported from the world’s major petcoke producer around 2.1 million tons. With large new petcoke capacities coming online in India in the near-to-medium term, it is likely that imports will play a relatively smaller role going forward.

FIGURE: UNCALCINED PETROLEUM COKE IMPORTS FROM U.S. (TONS) 2,500,000

1,250,000

0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012E

Source: CW Group analysis

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leaders

comment

Through the Eyes of an Analyst Nitin Bhasin, Ambit Capital’s infrastructure analyst, shares his thoughts on the current state of India’s cement market. Bhasin also touches on the trends and opportunities for the industry in 2013 and beyond.

ICCM: Can you share with our readers the history of Ambit Capital?

BHASIN: Ambit is an Indian firm that maintains a presence across the financial services spectrum. Established in 1997 as a Corporate Finance business with an M&A focus, the company forayed into the Institutional Equities business in 2007. Recently, Ambit was voted the most improved broker in India by the Asia Money polls.

ICCM: From your perspective, what is the current state of the Indian cement market?

BHASIN: After recording a 10 percent CAGR over FY05 to FY10, the cement

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demand growth has slowed down considerably (6% over FY10-12). As is evident from the GFCF numbers, a slowdown in the economy has trickled down to infrastructure construction, leading to a deceleration of cement demand growth in India.

Currently, the industry is facing an overcapacity situation led by the high pace of capacity addition over FY06-11. Industrywide capacity utilization level has dropped to 75 percent in FY12 from 85-90 percent during FY05-09.

Due to the skewed presence of the limestone clusters in the country, there is a huge mismatch of demand and production in certain regions such as South India,

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leading to the inter-regional transfer of cement, which distorts the demand-supply mechanism in other regions.

Finally, unlike most of the other countries in the world, the “brand” of cement has a strong role in driving market share of the incumbents, since ~65 percent of the demand is driven by the retail segment, which is low bargaining and brand conscious.

ICCM: What cement companies in particular stand out to you in the industry and why?

BHASIN: A large part of the overall industry capacity is controlled by two

Nitin Bhasin: After completing his Chartered Accountancy, Nitin Bhasin joined the sell-side of Ambit Capital eight years ago. Three of those years have been spent as an Infrastructure Analyst. In 2010, Bhasin took charge of infrastructure research at Ambit Capital.

He holds a BCom and MCom from Delhi University and is a qualified Company Secretary.

players, Holcim with 59 mpta through its two subsidiaries (ACC and Ambuja), and UltraTech at 52 mtpa (of which 50 mtpa are in India). While these players have a presence across the country, there are other regional players who have a strong presence (both in terms of regional market share as well as brand perception) in their respective regions.

The stand-out regional player in our view is Shree Cements (SRCM). SRCM is a northern-based cement player and is among the fastest growing players in India.

Its capacity increased to 13.5 mtpa by FY12-end from 3.2 mtpa in FY06. A costefficient player, the company is among the most profitable players in the country. The company has added capacities at significantly lower costs, compared to the average replacement cost of the industry.

SRCM also has 560 MW of installed power capacity, providing a steady stream of cash flows. Presently the company is planning to expand further at a similarly aggressive pace in present regions of operations and new regions.

Madras Cement (MC) is a South Indiabased cement player, which like SRCM has been very aggressive with capacity addi-

tions in the last few years. MC’s cement capacities increased to 12.5 mtpa with a marginal capacity in East India. While the company is not as efficient as SRCM in terms of costs, it enjoys a very strong brand franchise in the south, leading to higher realizations than most of the pan-India

months are the expected improvement in the economy and corporate spending, which could lead to a pickup in the demand from institutional clients. Also, with the general elections slated in FY14, the government may dole out higher benefits to the low- and middle-income groups

“The main opportunities which can drive the demand in the coming months are the expected improvement in the economy and corporate spending, which could lead to a pickup in the demand from institutional clients.” players operating in that region. Unlike many of its peers, the company primarily focuses on the retail or Individual House Builder (IHB) demand.

ICCM: What opportunities and/or challenges do you see for the industry in 2013 and beyond?

BHASIN: The main opportunities which can drive the demand in the coming

(by way of various populist measures). The increase in the disposable income of these groups might trickle down to higher housing demand in FY14-15. The per capita consumption of cement at ~142 kg is significantly lower than the world and China’s average (433kg and 1,120kg, respectively). Thus, in the next 10 to 20 years, the thrust of the government on infrastructure construction along with rising real-estate

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leaders comment penetration could lead India to be one of the most lucrative cement markets in the world.

Furthermore, since the demand could not grow in sync with the high pace of capacity addition over FY06-11, the industry is plagued by an overcapacity situation. In a low growth phase, the pricing power of the players comes under threat, with players vying for a higher market share. This combined with escalating raw material and fuel costs leads to a decline in profitability for the incumbents.

ICCM: What transformations or trends do you see underway in this sector and how will they affect the sector’s future performance?

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BHASIN: We expect the fragmentation in the industry to increase over the coming years, owing to the increasing significance of the regional cement players, who have aggressively added capacities in the last 3 to 4 years. Since these players seek to gain market share, the pricing discipline gets distorted, leading to lower profitability or lower growth. This aggressive capacity addition by regional players will lead to declining market share of the top-2 cement groups.

With the pace of infrastructure development in the overall economy expected to increase over the next 5 to 10 years, we expect the institutional mix to increase (~35% currently) going forward. The rising institutional mix will also increase the

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penetration of Ready Mix Concrete, which has a very high penetration rate in the developed world.

Another trend, which might play out over the years, is rising “Inorganic Activity.” The large global or domestic players might look to grow through the inorganic route given the lengthy process of acquiring land and other environmental clearances required to set up greenfield plants.

However, we believe this is not going to be easy, since most of the smaller players have strong profitability and would only sell at a high premium to the replacement costs.

Many global players are very small players in India and hence they may use this route to establish their presence in one of the largest and fastest-growing markets. BMWeek BMWeek BMWeek

We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48 848 N. Rainbow Blvd., Box #1658, Las Vegas NV, 89107, USA

TECHNICAL

ANALYSIS

CW GROUP RESEARCH

Cement trade prices fall to new lows in 2012 The 2012 trading environment was filled by turmoil and structural change. The main trading countries were no exception. Competitive pressures were seen in trading prices as well as destination markets.

he CW Group index for global gray cement FOB prices fell below US$80/ton in the third quarter for the first time in 2012.

This depressed level was last seen in the beginning of 2011, when gray cement traded at US$79. The preliminary October 2012 trade price, included in the latest release of CW Group’s Global Cement Trade Price Report (GCTPR), shows further declines.

The three main exporters of the world (as of the end of 2011), Turkey, China and

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Pakistan, operated in a challenging trading environment in 2012 that culminated with the emergence of a new world leader in cement exports, Iran. The Iranian companies secured the top position in cement exporting after a short four-year sprint.

In just the first eight months of the current FY 2012-2013 (started March 20), Iran exported around 8.25 million tons of cement. By focusing on its neighbors Iraq and Afghanistan, Iran diverted a material part of Turkey’s and Pakistan’s traditional market shares; Pakistan exported only 8.33 million tons of cement in 2012,

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decreasing its dispatches to Afghanistan by 6.8 percent.

Turkey managed to maintain fairly stable prices in 2012, holding a range between US$57 and US$59 per ton. However, the FOB exporting prices are still well below the peak of US$66 reached in mid 2011.

Part of the weakness comes from declining volumes. Between January and November 2012, Turkey exported 9 million tons of cement, more than 1.2 million tons less than the same period in 2011. Apart from the Iraqi export fall-off (a 29 percent

FIGURE: GLOBAL GRAY CEMENT FOB EXPORTING AVERAGE PRICE (USD / TON) 100

80

60

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Source: CW Group Research

FIGURE: TURKEY GRAY CEMENT FOB EXPORTING PRICE (USD / TON) 80

65

50

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Source: CW Group Research

decline), Turkish exports took a big hit from the Syrian unrest. The challenging situation was softened in some degree by a renewed focus on the Russian and Libyan cement markets.

China expanded its exports by around 5 percent in 2012, but also had to face declining prices. The country opened 2012 with gray cement FOB price at around US$60/ ton and largely kept this level for the duration of the first quarter. But the first quarter also saw some of the lowest quarterly

export levels of the year. Although export volumes improved as the year progressed, China also suffered from a slide in export prices for the remainder of the year.

Although China faced less demand within Angola, its main traditional export market, Chinese traders managed to obtain somewhat higher sales in other African countries, such as Congo-Brazzaville, CongoKinshasa, Gabon and Mozambique. Also, attracted by the positive prospects of the Singaporean cement market, China turned

its focus in that direction by exporting over 0.8 million tons in 2012.

A tough 2013 lies ahead for cement traders.

With Iran announcing ambitious plans for the year, suppressed demand continuing in some key European markets, weakness persisting in the north of Africa and the first signs of oversupply affecting Nigeria, the former three exporting powers will need to work hard to maintain FOB prices that have already tested new lows. BMWeek

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feature

East india

Tapping Its Potential

The eastern part of India is strategically located and acts as a gateway for Southeast Asian countries. As trading with China has increased, the eastern ports of India and subsequently the region itself have grown in economic relevance. The potential growth in the eastern region to a large extent has remained untapped. However, recent economic development, largely fueled by infrastructure spending, has many companies turning an eye to the region.

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mbuja Cements recently announced that the company would set up a third unit in West Bengal in Bandel in the Hoogly district. The company already operates two units in the state in Sankrail and Farakka. Additionally, Ambuja Cements is planning an investment of RS 325 crore for capacity expansion at its Sankrail plant.

The company’s push to increase its presence in eastern India seems a logical step given the upward trend in cement demand, first noted in the region in 2010.

One of the major reasons why cement demand has been on the upswing is the governmental focus on infrastructure development, resulting in several longterm infrastructure and construction projects, both in the public and private sector in the eastern states of Bihar, West Bengal, Odisha and Jharkhand.

Combined, these four eastern states accounted for more than 13 percent of the country’s total GDP in FY 2011.

Foreign direct investment (FDI) equity inflows were on the rise throughout India from FY 2010/11 to FY 2011/12, climbing to RS 165,146 crore from RS 97,320 crore, according to figures available from the Department of Industrial Policy and Promotion. Similarly, during that time, these four states combined saw FDI equity inflows quadruple.

So, what’s the attraction? For many investors, it’s that the region is rich in minerals, offers access to eastern trading routes and has a wealth of possibilities. While agriculture has dominated the region, the rise in the service and industrial sectors is aiding in redefining the regional economic makeup.

Bihar Bihar, once known for its high poverty, has begun to emerge in recent years as India’s fastest-growing state, achieving doubledigit economic growth for the past four years. Bihar recorded the highest economic growth in terms of GDP during the 11th

FDI EQUITY INFLOWS BY SELECTED STATE (RUPEES IN CRORES) Apr. 2011- Mar. 2012

2000

Apr. 2010- Mar. 2011

1000

0

West Bengal*

Orissa

Bihar & Jharkhand Source: Planning Commission Data

FY 2011 GROWTH RATE (YOY) 25.0

12.5

0.0

West Bengal

Bihar

Odisha

Jharkhand Source: Planning Commission Data

Five-Year Plan, which ended on March 31, 2012. The GDP growth rate for Bihar during this period was 21.9 percent, higher than states such as Maharashtra, Gujarat and others that remained below 20 percent.

Bihar has experienced an economic boom, with the five-year growth rate averaging 11.3 percent (FY06-FY12). Sectors such as construction, communications and trade, hotels and restaurants have fueled much of this growth. Under the 12th Five-Year Plan, the Bihar government is targeting an economic growth rate of more than 13 percent, a rate that many acknowledge may prove challenging.

Sustaining such a high growth rate will require overcoming some significant chal-

lenges such as electricity shortages (22% in FY12, 8.5% higher than national average), poverty (54.5% of population below poverty line) and poor roadways (a significant portion of the state’s 1.13 lakh kms of road remain unpaved and impassable during the rains).

Construction in the state has averaged a growth rate of 47 percent per year for the last five years. Government infrastructure spending has climbed from RS 2,000 crore to RS 160,000 crore per year. Particularly noteworthy has been the rise in road and bridge construction fueled by the government’s goal of ensuring that people from all corners of the state be able to reach the capital of Patna within six hours.

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feature BIHAR GROWTH COMPARISON TO SELECTED STATES Growth % since 2005/06

Growth % from 2000/01 to 2005/06

100

50

0

Bihar

Orissa

Jharkhand Source: Planning Commission Data

Political efforts also have renewed cement industry interest in Bihar. In August 2012, the state chief minister inaugurated a RS 100 crore cement plant in the Kaimur district of Bihar. Official sources have revealed that more cement factories are likely to be set up in the state, given its abundance of fly ash. Investment plans to the tune of RS 600 crore to set up units that would generate tons of fly ash have been noted.

With steady agricultural growth fueling the potential for opportunities in the foodprocessing sector, and indications that an

industrial recovery appears to be gaining momentum, Bihar is poised to continue on its strong economic path. Its ability to catch up to more industrialized states like Maharashtra and Gujarat is a likelihood that many companies are increasingly keen to become a part of.

West Bengal West Bengal has always been among the strongest states in Eastern India and acts as a natural corridor to the Northeast states.

Thanks to a shift in trade routes to countries in the east (China, Indonesia, Thai-

land and Japan), which has given greater relevance to the eastern ports, economic growth prospects in West Bengal have never been better.

West Bengal is one of the most densely populated states in India. Roughly 70 percent of the state’s population resides in rural areas, but there is a current trend toward greater urbanization. This has had a significant impact on construction growth in the urban centers. The commercial construction of malls and office space is on the rise. The emergence of the capital Kolkata as an information technology (IT) hub has sparked the development of real estate for IT offices. Urbanization has also fueled growth in the real estate sector to accommodate the increase in demand for urban housing. In fact, the real estate sector in West Bengal is showing the second-highest CAGR of all sectors, and the construction sector is the seventh-highest contributor to the state’s GDP. The state has been the third fastest-growing economy in the country, and the infrastructure sector has become one of the biggest beneficiaries of this economic spurt as the government has placed greater emphasis on strengthening the existing infrastructure and building new infrastructure to encourage more investments.

Odisha Having previously lagged behind in areas of economic and infrastructure development, Odisha has high potential for cement demand as it plays catch-up with the rest of the country. Unfortunately, the state has struggled with lopsided growth.

Coastal and western districts have historically performed well with regard to economic growth while north and southern parts of the state have lagged behind. Still, Odisha has managed to achieve an average annual growth rate of 8.8 percent (FY06FY10) and, according to industry body Assocham, to secure more than 11 percent of the total foreign direct investment (FDI) proposed in 2011-12.

The agriculture sector dominates, representing 60 percent of the state’s economy,

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had an impact on the development of other industries, the state is resource rich – home to around 40 percent of the country’s mineral wealth – suggesting it has immense potential for further industrialization.

Jharkhand is home to the major steel plants of the Steel Authority of India (SAIL). Currently, the state is responsible for producing between 20 and 25 percent of total steel produced in the country, and that number is projected to grow even more. The slag from these plants, useful in cement production, has proven attractive to cement companies. ACC and Lafarge India, two of India’s major cement players, have plants in the state and now SAIL, in association with Jaiprakash Associates, is planning to set up a 2.1 mtpa cement plant in Bokaro, utilizing slag from the Bokaro steel plant.

but the industrial sector, accounting for 26 percent, has grown at an average annual rate of around 9 percent under the 11th Plan. The services sector also witnessed high growth at more than 9.8 percent.

Odisha’s industries are based mainly on the natural resources – significant reserves of iron ore, bauxite, nickel and coal – available in the state. An added bonus for cement manufacturers is that the state is rich in limestone with roughly 2.24 billion tons of deposits. Investments have been seen in related units focused on producing BF slag and fly ash. Grasim and ASO Cements, for example, have signed MOUs for utilizing the fly ash and BF slag with multiple producers in order to add as much as 5 mtpa of cement capacity.

Following a PPP (Public-Private-Partnership) model, the Odisha government has approved more than 30 infrastructure projects in the state in areas of construction,

housing and other activities. Also likely to spark the demand for cement in the region is the National Highways Authority of India’s (NHAI) ambitious plan to upgrade a section of NH23 in Odisha – a RS 778.15 crore project to be completed over the next two years.

Jharkhand Jharkhand continues to fall short of the national average in almost all national indicators. There is no question that the socio-economic hurdles that must be overcome are significant for the state. Still, considerable progress in industrialization has been made since 2001. As many as 32 mega industries, 106 large and medium industries and 18,109 micro and small industries have set up shop in the state, representing an approximate private sector investment of RS 49,024 crore.

While the agricultural sector dominates 70 percent of the state’s economy, and has

Political instability has marred the pathway to economic growth in Jharkhand.

Not only has the state endured eight governments since 2000, but corruption and ongoing battles with Maoist insurgents have marred the state’s development. The potential for further industrial development is great provided the government can stabilize, continue to encourage greater economic liberalization and convince foreign investors the rewards outweigh the risks.

Conclusion The overall improvement in the economic scenario in the eastern states is bringing back the focus on better infrastructure, connectivity and construction in these states. While road construction activity is driving cement demand in Bihar and Jharkhand, urbanization is key to increasing cement demand in West Bengal. In Odisha, the cement outlook is bright thanks to the several long-term PPP infrastructure and construction projects.

These long-term demand drivers, combined with the fact that several areas in the east have an abundance of cement raw materials, make it clear that cement demand in this region will continue to grow in the near future.

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FOCUS

Carbon Mineralization Reducing CO2 Emissions

New research on the reduction of industrial CO2 emissions with carbon mineralization may offer a short-term resolution to curbing the amount of CO2 released into the atmosphere from the burning of fossil fuels. The process involves low-temperature technology, low pressure and low cost, without the necessity of capturing purified CO2.

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r. Guy Mercier and his team from Institut National de la Recherche Scientifique (INRS) have been awarded $300,000

by Carbon Management Canada to pursue research on the reduction of industrial CO2 emissions with carbon mineralization. It involves having calcium and magnesium rocks react with gas emissions containing CO2 to prevent the hazardous fumes from being released into the atmosphere.

The objective is to discover a process that will significantly reduce CO2 emissions from industries such as coal power plants, cement plants or steel plants.

Global Carbon Emissions Misses International Target Despite various efforts worldwide to reduce global warming to the 2-degree-Centigrade international target, every country is failing miserably. In 2011, the biggest contributors to carbon emissions were China and the U.S. at 28 percent and 16 percent, respectively. The European Union follows at 11 percent while India is fourth at 7 percent. According to a study from Global Carbon Project, worldwide CO2 emission increased by 3.1 percent in 2011 and is estimated to have grown by another 2.6 percent by 2012. And for every year that emissions increase by 3 percent, meeting the temperature limit becomes less likely and more expensive.

At present, most industrial equipment relies on the burning of fossil fuels, and Dr. Mercier from INRS believes his team is on the verge of discovering a way to use rocks, waste concrete or tailings from mines to remove CO2 from gaseous emissions.

an alkaline agent in wastewater treatment.

The goal is to develop a process that is economically viable as well as one that can be integrated into industrial applications to pave the way for easy adoption by various sectors.

Due to the promise of such technology, Carbon Management Canada (CMC) awarded Mercier’s team with $300,000 funding over two years to complete their work. According to Mercier, rock, concrete or mine tailings will be pulverized and sent up the chimney together with the gas. The chemical reaction will result in the formation of carbonate by-products and an 80% reduction in the CO2 diffused into the atmosphere.

Along with Dr. Mercier’s researchers, cement manufacturer Holcim Canada and consulting firm Sigma DevTech will provide support to the project. Researchers will work with staff at Holcim Canada’s cement plant to implement tests during plant operations. Mercier admits there are still engineering challenges along the way, but believes that they will find success.

The process involves low-temperature technology, low pressure and low cost, without the necessity of capturing purified CO2. Moreover, the carbonate byproducts may be sold to other industries as TOTAL GLOBAL CO2 EQUIVALENT EMISSIONS

18%

13%

4% 3%

Recent studies show that the major culprit for global warming is energy use, of which 30 percent is attributed to the industrial and governmental sector. Other contributors to carbon pollution are land changes, particularly deforestation, at 18 percent, and 17 percent from transportation.

The Key to Mitigation Is Energy Use With the majority of carbon pollution attributed to energy use, the key to reducing emissions will be how energy is produced and processed. While most efforts are focused on finding renewable and sustainable energy sources, there are scientists who believe the short-term resolution would be to find a way to prevent more CO2 from being released into the atmosphere from the burning of fossil fuels.

Should the project prove successful, it will translate to significant reduction in carbon pollution from steel plants, cement plants and coal-fired plants. This may be the break that the world needs while we continue our search for cleaner and more sustainable energy sources.

17% 45%

Agriculture (non-energy)

Industrial (non-energy)

Waste (non-energy)

Transportation

Land Changes

Energy Use

Source: Based on WRI, 2005 World Greenhouse Emissions; updated with UNEP (2010) data on Land Changes.

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COMPANY

profile

ACC Limited

Building for Tomorrow ACC Limited has proven to be a trendsetter in the Indian cement industry since its inception more than seventy-five years ago. The company has built a reputation for innovative research and product development, and shows no signs of slowing down with regard to expanding its position in the cement market.

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ounded in 1936 through the historic merger of ten cement companies, ACC Limited is the leading manufacturer of cement and concrete in India with 16 cement factories and 55 ready-mix concrete plants. Aside from cement and concrete, the company, along with its subsidiaries, is engaged in the production and supply of ground slag, the mining of limestone, and the mining of coal blocks. Since 2005, ACC has been associated with Holcim Group of Switzerland when the latter acquired majority shares through Holcim Cement and Ambuja Cements India.

ACC, headquartered in Mumbai, maintains a nationwide footprint. It operates 16 cement plants with a total of 30 mtpa capacity, along with the company’s vast network of 10,000 dealers, 21 sales offices and a workforce of over 9,000. With such extensive operations, it is one of the biggest contributors to the Indian economy as a large customer of the railways, the transportation industry and the coal industry.

Operating Environment At the core of ACC’s business operations is an unwavering commitment to product quality and process improvement that does not risk compromising social responsibility. All of ACC’s plant facilities feature state-of-the-art technology for process control, testing and quality control.

Along with aiming to be the market leader in cement quality, ACC intends to minimize its carbon footprints with environmental programs that complement its operations and facility improvements.

In addition to the latest pollution control equipment installed in each of its cement plants, ACC implements waste management, quarry rehabilitation and utilization of alternative fuel and raw material resources.

Production For the past five years, ACC’s cement production has been stable, reported at no less than 20 million tons per year. Production is forecasted to improve in the coming years as the company gradually increased its capacity in 2010 and 2011 with production at 21.14 million tons and 23.46 million tons, respectively.

As of October 2012, cement production has reached 20.34 million tons, a 2.73 percent increase from 19.8 million tons for the same period in the previous year.

Financial Performance ACC posted a net profit of RS 2486.70 million for the quarter ended September 30, 2012, as compared to RS 1675.70 million for the quarter ended September 30, 2011. Total income increased from RS 23060.60 million for the quarter ended September 30, 2011, to RS 25285.40 million for the quarter ended September 30, 2012.

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Moving Forward Long term GDP growth of India is forecasted at approximately 7 percent, triggered by the government’s projected increase in infrastructure investment and mass urbanization over the coming years, which is expected to fuel cement demand by 8 to 9 percent per annum. It is under this forecast scenario that ACC intends to adapt and respond accordingly to keep a good grip on its market share of roughly 11 percent (2011).

To be able to maintain its position in the market, ACC is targeting to increase its capacity from 30 mtpa noted in 2011 to 38 mtpa in 2016 and 55 mtpa by 2020. The company’s bid to double its capacity in a decade is dubbed by CEO Kuldip Kaura as “Creating Another ACC.” Aside from increasing its capacity to keep pace with growth projected in the Indian economy, ACC is targeting to stay ahead of the competition by continuously improving its products and at the same time focusing on a strong dealer network and customer satisfaction. To better serve its customers, the company will establish Customer Help Centers and provide an interactive website. Moreover, ACC is planning to reduce delivery time to within two hours.

Further, ACC plans to continue building on its established strength – operational and manufacturing excellence. For this initiative, the company intends to use Holcim’s global network of companies as

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CEMENT PRODUCTION & UTILIZATION Utilization

25

Production

100

20

15 80

mtpa

For the nine months ending September 30, 2012, ACC earned net sales of RS 8,083 versus RS 6,936 in the same period in the previous year for a 16.54 percent sales growth. Despite higher sales, net profit for the nine months of 2012 declined by 3.84 percent at RS 822 compared to the same period in the previous year at RS 855. The decline was primarily attributed to the retroactive change in the calculation of depreciation expense on fixed assets pertaining to its captive power plants.

10

5

0

2007

2008

2009

2010

2011

60

Source: ACC Limited

GROWTH POTENTIAL Market Size (mtpa)

500

mtpa

COMPANY

profile

Installed Capacity (mtpa)

250

0

2011

2016

2020 Source: ACC Limited

a benchmark to measure operational performance and implement safety standards within its plant facilities.

While ACC strives to improve profitability and efficiency, it will continue to implement programs that will maintain its commitment toward Corporate Social Responsibility. Efforts are ongoing to reduce CO2 emissions and at the

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same time find more ways to reduce energy and water consumption. Other environmental endeavors include the use of renewable energy as it plans to increase its installed 19 MW wind power by another 15 MW. The company is likewise installing a Waste Heat Recovery System at its Gagal plant while evaluating the viability of having other plants equipped with the same system. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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focus

TDF 30 Years On A Winning Alternative?

Pound for pound, tires have more fuel value than coal and over the last three decades have proven their worth as a reliable alternative fuel source. For more than 30 years, cement manufacturers and engineers have worked to refine the recovery process to garner energy from tires, and today even more manufacturers are embracing the use of tire derived fuels (TDF) more aggressively.

he necessity to adopt alternative fuel usage is on the rise, with industry sources suggesting cement manufacturers are using anywhere from 20 to 70 percent alternative energy sources in their kilns. The alternative energy sources are diverse and range from biomass to paper fuel to plastic-derived fuel. While all have enjoyed varying degrees of implementation with cement manufactures, one in particular has been embraced worldwide.

Advantages of TDF TDF, which has proven to be a highly effective alternative fuel source, first made its appearance in German cement kilns

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in the late 1970s. Since its more widespread adoption in cement plants worldwide, studies have confirmed that tires can produce more energy, roughly 25 percent more energy than coal, with one ton of TDF used in a cement plant potentially replacing 1.25 tons of coal.

The rapid combustion and relatively high heating value achieved by burning tires can be attributed to the fact that roughly 88 percent of the tire is composed of carbon and oxygen. Regardless of where manufactured, tires typically contain, by weight, 1.2-1.5 percent sulfur, 1.5 percent zinc, less than 1 percent moisture, 2.5 pounds of high-grade steel and some trace

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metals. The chart on the next page illustrates the fuel content of tires versus coal with regards to carbon, hydrogen, oxygen, nitrogen, sulfur, ash and moisture.

As illustrated, tires produce lower levels of most of these chemical components.

Thanks to the use of high-tech equipment, fewer toxins associated with TDF, as opposed to coal, are being released into the atmosphere. As tires can be burned at extremely high temperatures, toxins are being broken down before they are released into the atmosphere.

Emissions have been another important consideration. When burned in a con-

CHEMICAL COMPOSITION TDF VS COAL

Coal (%) 100

TDF (%)

83.87% 73.92%

50

7.09%

4.85%

0 Carbon

Hydrogen

2.17%

6.41%

Oxygen

0.24%

1.76%

Nitrogen

1.23%

1.59%

Sulfur

4.78%

6.23%

Ash

0.62%

5.24%

Moisture Source: CM

trolled environment, TDF emissions have been shown to be no greater than those produced by other fuel sources. The carbon content per unit of energy is less than coal, allowing for a potential reduction in greenhouse gas emissions. Furthermore, any ash generated from TDF contains fewer heavy metals than coal in cement kilns, so the rubber from the tires provides energy, and the iron and sulfur have been effectively incorporated into the cement.

Cement companies using TDF as an alternative fuel source have significantly lowered their cost of production because using TDF is less expensive than coal, especially if the costs of exploration, development and transportation of fossil fuels are added into the equation. Depending on the regional market, coal can fluctuate widely and sell anywhere from US$60 to $140 per ton. In comparison, the cost of tire chips averages around US$25 per ton. To put it into perspective, if a cement company used 20,000 tons of tire chips annually in its production instead of 20,000 tons of coal, it potentially could save around US$1.8 million annually.

(EU) and countries (states and provinces in the U.S. and Canada) have banned tires from landfills — and the elimination of potential fire hazards and infestations such as mosquitoes.

Not Without Concerns TDF is not without its controversies and concerns. Communities surrounding cement plants using TDF have often raised health and safety concerns associated with the burning of tires. Community members and environmental groups often raise issues regarding the possibility of black smoke, adverse odors and harmful emissions such as dioxin-furan emissions and carbon monoxide. Several studies by various government agencies and organiza-

tions, however, have indicated these emission levels are within acceptable health and safety levels.

The U.S. Portland Cement Association (PCA) conducted one such study that confirmed these findings. In the 2008 study, member companies of the organization completed a pilot study on the impact of TDF firing on cement-kiln air emissions. The study looked at the emission tests of more than 30 cement plants firing TDF. Dioxin-furan emission test results showed that kilns firing TDF had emissions approximately one-third of kilns firing conventional fuels. Emission values for carbon monoxide and total hydrocarbons were found to be slightly higher in

The advantages also extend to the communities in which cement plants operate. For communities, the use of TDF has meant a reduction in the deposit of tires in landfills — good news considering many regions

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focus CHEMICAL COMPOSITION TDF VS COAL KgCO2/ Gigajoule

Emissions (kgCO2/ton)

Energy (Gigajoule/tons)

3,500

1,750

0

Tires

Coal

Petcoke

Diesel oil

Natural gas

Wood

Source: Greenhouse Gas Protocol Insitiative, WBSCD

TDF versus non-TDF firing kilns in the PCA study, but the U.S. Department of Energy (USDOE) in a separate analysis has estimated that the combustion of TDF produces less carbon dioxide (CO2) per unit of energy than coal.

Another potential roadblock lies with cement companies and the sustainability of TDF. Given the sheer number of scrap tires in the world, concerns about maintaining

adequate supply levels seem implausible, but they are not. The economics of TDF are heavily influenced by transportation costs.

Typically, the transportation of whole tires is limited to around 150 miles before the cost of transportation outweighs the value of the tires. Processed TDF can be transported longer distances, but distance still factors into price. As TDF markets tend to develop where an effort is made to develop scrap tire markets, TDF users may quick-

ly find themselves located within a highly competitive market. In such a market, some cement companies have been scrambling to secure long-term agreements with scrap tire providers, cities and states. Others have even turned to importing scrap tires to meet demand.

On the Rise Over the years, there has been a continued increase in the number of cement plants that use TDF. Global manufacturers in particular leading the TDF charge include Cemex, Holcim and Lafarge, to name just a few. On average, estimates suggest that TDF has replaced 5 to 25 percent of the heat energy requirements in cement plants worldwide. Some European cement plants are even using as much as 80 percent of TDF. The story is similar for most major developed nations where recycling/recovery rates are high. For example, in the United States, the use of tires for fuel has become the norm instead of the exception among cement manufacturers.

For developing economies where land-use and disposal regulations are not as strong, TDF usage has grown more slowly, but it is growing as more cement companies in countries such as Brazil, Mexico, India and Pakistan begin to more aggressively implement TDF programs. News reports suggest a growing trend to use TDF in developing countries. In Mexico, since October 2011, units of Holcim and Cemex have helped Cancun’s landfills dispose of 700,000 tires at no cost to the city. Faced with rising fuel costs, Jordan’s Al Rajih Cement also turned to TDF this year, and in Brazil cement companies with support from the Brazilian government are ramping up TDF efforts.

The introduction and utilization of TDF is a trend that has lived up to the expectations of cement manufacturers in need of highly efficient alternative fuel sources for production. For the cement industry, not only has the use of TDF reduced production costs, but it also has helped to foster sustainability goals and safeguard the environment. In short, it has become a winwin situation for both cement manufacturers and the world community at large. BMWeek BMWeek BMWeek

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C C C

focus

The One-Two Punch of Transportation Costs

The cement sector may be reeling from the 1-2 sucker punch recently received courtesy of the government and Indian Railways. In November, Indian Railways said it would increase its haulage rates by up to 31 percent for container train operators (COTs). The two-phased increase kicked off in December with a 22 percent increase taking effect. Another increase is expected in February 2013. If that wasn’t disheartening enough news to absorb by itself, the recent announcement that the government proposes to increase diesel prices by RS 1 every month for the next 10 months, until the price reaches a projected average of RS 50, should leave many cement manufacturers bracing for what they have alluded to in the past: higher cement prices for 2013.

Given the low-value high bulk qualities of cement, freight costs have tended to be considerably higher for cement companies, utilizing both road and rail transport. Therefore, there often is little room to absorb a cost increase. The announced increases in both railway costs and diesel costs leave cement companies with little maneuverability when it comes to finding cost-effective solutions to transportation needs.

he last time diesel prices climbed, in September 2012, and All India Motor Transport Congress (AIMTC) subsequently increased its freight charges across the country by 15 percent, the cement industry indicated it would be unable to “absorb” the increased freight charges caused by the rise in diesel prices. Cement prices rose at that time, and these latest actions suggest that once again, cement companies will have little choice but to pass higher transportation costs on to their customers.

On average, the transportation costs of cement can account for roughly one-third of total variable costs. Cement companies historically have relied on an extensive transportation network of roadways and railways, not just to move needed coal for production, but also to dispatch cement to market. For coal, dependency on rail transportation is still high, accounting for around 70 percent of all coal movement. Cement companies rely more heavily on roadways, which transport an estimated 66 percent of cement dispatches.

Transporting freight by roadways has been costlier but remains the dominant freight system in India. In terms of economies of scale, transportation via rail would appear more beneficial for cement companies with regard to the tonnage that can be moved.

For example, a single rake can handle around 2,400 tons of cargo, while a single truck has the capacity to carry between 16 and 20 tons. Therefore, to carry 2,430 tons, approximately 120 trucks would be needed.

Unfortunately, even if rail transportation proved to be the more affordable solution, problems remain such as unreasonable rate hikes by the railways, a lack of railway containers and poor turnaround time for loading and unloading containers due to a lack of proper facilities and congestion. If Indian Railways, which enjoys 70 percent of its revenues from freight transport, expects to continue to enjoy high growth rates, it will need to do more to remain competitive and to meet the future demand for freight capacity.

Cement demand for fiscal year 2013 is expected to be 8 percent higher, and a similar level of growth is expected in cement prices, according to analysts. However, some manufacturers such as UltraTech already are warning that margins are under pressure, and likely to remain so, because of the rise in fuel and transport costs. Should these pressures continue, any increase in demand may be nullified. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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cement market & competition

M

arket and competition

The eleven cement makers penalized by the CCI for alleged cartelization have approached Compat for a hearing to contest CCI’s ruling. Some analysts express concern over weakening cement demand. Chettinad Cement Corporation seeks shareholders’ approval to delist.

Ruling Challenged Eleven India cement makers and a trade body are drawing up plans to question the legality of the case when it comes up for hearing before the Competition Appellate Tribunal (Compat). The firms were penalized RS 6,714.83 crore by the Competition Commission of India (CCI) for alleged cartelization.

Cement makers say the commission did not hear their side of the story and its decision was based on allegations by builders’ associations. They are also saying CCI relied too much on circumstantial evidence as opposed to direct evidence.

average EBITDA per ton of cement produced in the industry. Madras Cements’ figure of RS 1,190 is 19 percent higher than that of its nearest rival Ambuja Cement.

UltraTech Cement, ACC and India Cements follow.

“We planned to have captive power in the 1990s. At that time, the idea was to reduce dependence on costly diesel genset power,” says AV Dharmakrishnan, CEO of Madras Cement. Since then the company has

Management Praised Madras Cements has cited the company’s management style for helping it climb the ranks of the country’s top cement firms.

The company is part of the RS 4,500-crore Ramco Group, which is gaining notice for how smartly it manages its operations and reaches benchmarks on cost management.

A recent report by brokerage Motilal Oswal pointed out how on a five-year basis, Madras Cements has generated the highest

24 JANUARY / FEBRUARY 2013

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installed 160 MW of windmill capacity, spending some RS 1,000 crore in the process. Of this, it uses only 20 MW and sells the rest to the grid.

Weak Demand Shares of India’s major cement companies were in the red as rising concerns of weak demand and falling prices weighed on market sentiment. According to a JP Morgan report, the weakness in demand for cement, seen over the last few months,

“Once the severe winter gets over, we expect some demand recovery, particularly in northern India, over the coming months. However, the underlying demand trend remains worrying given the lack of private infrastructure spending and lack of government spending. The latter in particular does put in question the much anticipated ‘election year’ spending in 2013 that many investors expect,” said the report.

Mine Reclaimed India’s coal ministry has deallocated a mine granted to Madhya Pradesh State Mining Corporation (MPSMC), which had secured a deal to develop the mine with cement maker ACC. The block was allocated to MPSMC in 2007, and in 2009 the state government agency entered into a joint venture agreement with ACC Mineral Resources, an arm of cement maker ACC, for development of the mine, as per documents submitted by the Coal Controller’s office in Kolkata.

“Semaria-Piapria coal block allocated to MPSMC is deallocated. The company shall not be eligible for allocation of coal block in lieu of the deallocated coal block.

The bank guarantee (BG), as calculated by the Coal Controller’s office to the extent of RS 1.14 crore (i.e., 50% of the BG related to development of the coal block), will be invoked and deposited with the government in the relevant head of account. The remaining BG may be returned,” read the letter sent to the Chairman and Managing Director of MPSMC. Plants on Forestland Nine cement plants in Meghalaya are being run on forestland, according to a report

from a team appointed by the Supreme Court in India. The Joint Inspection Team (JIT) found that nearly 50 percent of the surveyed land under the nine cement plants in the Jaintia Hills district was classified as forest.

“Out of the 2,150 hectare inspected, 838 are forest, 1,254 non-forest and 58 unresolved,” said the report submitted to state government. According to the report, the nine companies are Adhunik Cement, Amrit Cement Industries, Cement Manufacturing Company, Cosmos Cement, Green Valley Industries, Goldstone Cement, Hills Cement, JUD Cements and Meghalaya Cement.

Move to Delist Chettinad Cement Corporation wants to delist from the local bourse and is seeking shareholders’ approval. According to an announcement by the company on the BSE, Chettinad Holdings, a promoter group company, plans to acquire 11.56 percent of the equity of about 44.16 lakh shares to take full ownership of the company. The promoter group now holds 88.44 percent stake in the company.

Last April, Chettinad Cement’s board approved a proposal to delist and to acquire the public shares at an indicative offer price of RS 575 a share. The actual price will be set through the book-building route.

Market Advantage Shree Cement is expected to gain from the improving supply demand scenario in the near term.

“With minimal incremental capacity to be commissioned in the next couple of years, capacity utilization in the industry will improve. Cement capacity in the northern region is expected to go up by 4 percent annually in FY13 and FY14, while demand is expected to grow by 6% to 7% in the next two years. This will lead to better pricing power for Shree Cement,” an analyst’s report noted.

CEMENT: MARKET AND COMPETITION

continued in December as well. The north India region saw a sharp slump on the back of bad weather conditions and weak spending by the government. The report added that demand in western India also suffered with activity in part of Gujarat cooling off. South India demand was also seeing seasonal weakness.

According to the report, Shree Cement is also one of the most efficient companies in the sector. Its plants are located in Rajasthan, closer to the key markets. Further, the company uses pet coke for its fuel needs, while many of its peers use coal. It is estimated the price of pet coke on kilocalorie terms is cheaper than imported coal. Due to this, the company’s operational performance is viewed as superior to its peers.

focus New Marketing Campaign Reliance Cement has launched a sixmonth out of home innovative campaign in the Vidharba region of Maharashtra to promote its cement brand. One creative aspect of the campaign showcases a huge cement bag placed on a billboard. The bag is shown pouring cement on a person, making him look like a cement man. In addition, a huge moving crane attached to a motorized pulley is erected across the billboard, apparently pulling the cement bag. The tag line reads “Naya Zamana Naya Cement.” The campaign was created by the DDB Mudra Group.

“Our aim was to create a niche for the brand and develop its presence in the region,” Monal Kabra, Director, group account, DDB Mudra Group, said. The campaign began in September 2012 and will run for six months.

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cement volume and pricing

V

olume and pricing

Cement prices begin to rise. Additional capacity, despite weaker demand and capacity utilization, is expected in 2013 as more delayed projects come on line.

Additional Capacity India’s cement industry is expected to install additional capacity, despite weak demand and low capacity utilization. The cement industry is projected to add another 30 to 40 million tons of capacity. It currently has a capacity of 324 million tons per year and operates at 75-80 percent utilization, due to weak cement demand from realty and infrastructure sectors. The capacity addition for 2013 will be more than expected as some of the projects slated for completion in 2012 were delayed and will now go online in 2013.

Some of the major projects that will be completed during 2013 include ABG Shipyard’s 3.3 mtpa at Kutch in Gujarat and Century Textiles’ 2.5 mtpa at Chandrapur in Maharashtra. In Karnataka, Sagar Cement and Chettinad Cement will add 3 mtpa and 2.5 mtpa at Gulbarga, and UltraTech Cement will come up with 4.4 mtpa at Malkhed.

Prices Start to Rise In mid-January, cement prices started to rise after a few months of decline. Since November 2012, prices had fallen due to

26 JANUARY / FEBRUARY 2013

RS 270 for a cement bag, has surged to around RS 280-285. This is the first major hike after the monsoon.

weaker demand even as the peak construction period started. Sector analysts say the current rise in prices is in line with their expectations as post mid-January dealers had signaled fresh hikes. The northern region has taken the lead, as the price hike is in the range of RS 20-25, while in the west, prices are being quoted RS 15-20 higher for a 50 kg bag of cement.

Meanwhile, the eastern market also saw a rise of RS 10-15 recently. Only the southern region so far has stayed away from a price hike, but dealers in the region hinted that they too would follow suit.

With the recent price hikes, the all India average price, which was hovering around

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Heidelberg Hikes Prices The India based unit of HeidelbergCement hiked cement prices by RS10 on a 50 kg bag in west and central India in midJanuary. According to Ashish Guha, CEO and MD, the hike was long overdue given a prolonged slack season. He further said that the company has not yet raised prices in the southern market but a revision cannot be ruled out in the near term as the situation is improving in the region.

The company made the decision to revise prices after sales picked up around 20 percent month-on-month in December after months of sluggish growth.

“On a larger scale, the industry is poised for a moderate growth in the medium term due to a sudden spurt in construction activities on eased policy reforms. The sector, at the beginning of 2013 has even predicted a 12% growth and a significant price correction,” Guha said.

CEMENT: PEOPLE volume and pricing

focus

P

eople

Loesche Finds Success at MPC The MPC (Madurai Productivity Council) organized a seminar in Pune in October 2012. The theme of this year’s seminar was “Cement industry - Lean and Greenway.” The seminar was held in the hotel Le Meridien for roughly sixty participants.

The participants were mostly related to cement and allied industries; they ranged from cement plant managers, corporate level managers and consultants to head of Indian operations. There were fifteen different presentations from various OEM’s such as Loesche and IKN India and cement manufacturers such as Orient Cement, ACC- Holcim, J.K. Cement India and Madras Cements.

This year, Loesche participated in the MPC Seminar with two papers. The first was presented by Vishal Aggarwal from Loesche India on “Clinker Grinding without water spray and hot gas in Loesche VRM – A Case Study at ACC Ltd.” Loesche received the “Best Paper Award” for this presentation. The second Loesche paper was presented by Rohan Sharma from Loesche, Germany, on “Generating of High Specific Surface Areas on Loesche Mills.”

A site visit to M/s Polysius India manufacturing unit on the second day, together with the seminar, made MPC a quality seminar with good technical papers and a platform to interact with many people from various levels in the cement industry.

Holtec’s Chairman is honored with lifetime achievement award.

Loesche India welcomes new managing director. Udaipur Cement Works installs an additional board member.

New Delhi on December 12, the award was presented to Shrivastava in recognition of his exemplary contributions towards supporting the promotional, collaborative and regulatory role of the association in the development of the engineering consulting profession.

P.C. Abraham

Lifetime Achievement Award Holtec India’s Executive Chairman, Umesh Shrivastava, was honored by the Consulting Engineers Association of India (CEAI) with its prestigious Lifetime Achievement Award. In a glittering ceremony held at

New Managing Director P.C. Abraham took over responsibility as Managing Director of Loesche India on October 1, 2012. In his new position as Managing Director, Abraham is responsible for the management of Loesche India.

Abraham joined Loesche India in 1995 and had been working as Executive Director of the Technical Department. Under his leadership, Loesche India established a successful and competent Technical Field Service Department. Further, he was responsible for significant growth in the company’s after sales business.

Additional Director Appointed Udaipur Cement Works installed Shri Ganpat Singh as an Additional Director on the Board of Directors of the company in November 2012. Singh holds an engineering degree and has more than 43 years of experience in the cement industry.

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cement projects and expansions 5

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1 rojects and expansions

Expansion program is completed at Heidelberg’s Jhansi unit. Ambuja Cement is interested in setting up a third unit in Bengal while Shree Vinayak Cement Company has put in an application to expand its Jharkand-based unit. Rashtriya Ispat Nigam (RINL) is reportedly mulling over setting up of a cement plant.

Jhansi Unit Completed HeidelbergCement has finished its expansion program for its new facility in Jhansi. This hikes the company’s total cement capacity to 5 mtpa under its RS 1,400 crore expansion plan. The Jhansi unit’s capacity has now gone up to 2.7 million tons per annum from 0.8 million tons per annum earlier.

“This is the first move towards our expansion plans in Central India. With the commissioning of the new mill that has been funded through a mix of internal accruals

and debts, the company has increased its all India cement capacity to 5 million tons per annum,” Ashish Guha, CEO and Managing Director, HeidelbergCement India, said.

According to the report, the company also is enhancing the capacity of its Damoh unit in Madhya Pradesh to 6 mtpa. The date of commissioning of the project was to be announced soon.

“We expect cement consumption to grow at a relatively higher rate in Central region and stand committed towards bettering the prospects for our stakeholders,” Guha said.

New Jammu Plant The government of Jammu says it wants to install the JKCL cement plant as soon as possible. Minister for Industries and Commerce S.S. Slathia says the upcoming clinker grinding-cum-packaging unit called for commissioning of the plant as early

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as possible, so that the company could tap the majority market share of cement. The plant will produce 300 TPD cement.

Interest in Bengal Ambuja Cement has expressed interest in setting up a third unit in Bengal. The company already has plants in Sankrail and Farakka. State Commerce and Industries Minister Partha Chatterjee said the cement manufacturer was looking for a Greenfield unit in Benga and was in talks to set up a plant near Bandel in Hooghly. Chatterjee said that ACL would invest close to RS 225 crore for the new unit.

Jharkand Expansion Shree Vinayak Cement Company, belonging to the Sandhu Group of Companies, has put in an application to expand its Jharkand-based unit. The plan entails the expansion of its cement grinding unit at a cost of RS 75 million. As of December 2012, environmental clearance has been received and the project is waiting for power supply.

Mulling It Over Rashtriya Ispat Nigam (RINL) reportedly

“We may enter into a joint venture partnership for setting up a cement plant. Fly ash, a byproduct from our power plant, is getting accumulated, which may create an environmental issue in future. We may also enter long-term agreement for supplying these products. There will be clarity in a few days,” an official added.

McNally scores project India’s ACC awarded a plant construction project to McNally Bharat Engineering for RS 733 crore. “The company has received an order from ACC for onshore supply, civil construction and installation and erection of New Jamul Cement plant,” McNally Bharat said in a filing to BSE. According to the filing, the order has a contractual delivery period of 30.5 months.

focus Website Improvement Cachapuz Bilanciai Group has improved its website with new contents about the SLV Platform Solution, which improves the logistics, inbound and outbound processes in industrial plants. The SLV Platform is an innovative software and automation truck management system for industrial plants where a considerable number of trucks need to be managed daily. The SLV Platform Solution can be tailored and implemented in cement plants, aggregates industries, waste management, agriculture and food industries (fruit, cereals, tomato, etc.), power and energy companies (such as power plants), mining and quarrying, sugar industry, wood processing industries, steel works and foundries (steel, zinc, etc.), transportation and logistics companies, maritime ports and terminals and other industries.

CEMENT: projects and expansions

is mulling over setting up a cement plant as part of its plans to dispose byproducts such as slag and fly ash. RINL also may enter into a long-term contract to supply these byproducts to others in order to prevent their accumulation, which can lead to environmental issues.

The SLV Platform provides the complete automation of the main functional areas of the plant including automatic truck parking management (queue and calling), access control and identification, self-service and unmanned weighing, self-service bulk loading for trucks and wagons, bag loading and automatic counting control, raw materials unloading control and validation, truck fleet management and tracking (GPS/GPRS), business and KPI analysis, and ERP integration in online and offline modes (contingency).

New website contents include detailed information about the software and hardware modules and the integration capabilities with the customers’ ERP and automation systems, some case studies, references, testimonials of Cachapuz’ customers and demonstration videos.

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&a and finance

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Vicat and CCH are looking for additional opportunities in India. ABG Group is reportedly looking to sell its minority stake in its cement business while several heavy hitters are in talks to pick up a minority interest in Lafarge India.

On the Hunt The Vicat Group is looking for additional acquisitions in India as part of its expansion activities. In 2010, Vicat purchased a 51 percent stake in Hyderabad’s Bharathi Cement that provided it with a 5 million ton facility at Kadapa in Andhra Pradesh. More recently, Vicat’s joint venture with Sagar Cements started production at its Gulbarga plant, which is located north of Karnataka. The plant has a nominal cement capacity of 2.8 mtpa, a captive power plant and immediate access to rail transport.

Unloading Stake The ABG Group is reportedly in talks with private equity and financial firms to sell a minority stake in its cement business for about US$150 million. According to news reports, it currently operates a 6.5-million ton facility in Kutch, Gujarat, which is expected to be commissioned in the immediate future. The potential deal, said Dhananjay L. Datar, Director of ABG Group, is in the preliminary stage with several parties indicating interest in the cement unit.

30 JANUARY / FEBRUARY 2013

People familiar with the matter indicated that private equity A-listers such as Blackstone and KKR have held an initial round of talks and that Rishi Agarwal-promoted ABG Group could sell up to 49.9 percent stake in the cement venture. Investment bank 03 Capital is managing the fund-raising process for ABG Cement.

Further Expansion Ireland-based CRH plans to continue expanding in India, but remains non-committal on how it will do it. CRH Chief Executive Myles Lee has confirmed the company remains interested in expanding its presence in India after rumors that it is involved in preliminary talks about acquir-

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ing a majority stake in an Indian cement manufacturer.

According to one report, CRH and rival Holcim are in separate talks with the Shriram Group to buy a stake in Sree Jayajothi Cements, based in the southern state of Andhra Pradesh. The company owns a 3.2 mtpa facility in the region.

Lee said that CRH remained interested in expanding its presence in India, but declined to comment on speculation surrounding Sree Jayajothi. CRH “is continually looking at opportunities” in India and is “keen” to expand its presence there.

CEMENT: m&a and finance

Foray into Bigger Projects Promac Engineering has secured a joint venture company, Japan’s Taiheiyo Engineering Corporation (TEC), to foray into large-size cement plants. TEC is a wholly owned subsidiary of Taiheiyo Cement Corporation (TCC). TCC has a total installed capacity of 40 million tons cement clinker per annum in Japan, the U.S. and several Pacific Rim countries.

The joint-venture company, Taiheiyo Promac Engineering Private Limited, would assist Promac in foraying into largesize cement plants with capacities up to two mtpa, J. Surendra Reddy, Chairman and Managing Director of Promac, said.

For the past 25 years, Promac has been in technical collaboration with Taiheiyo setting up several cement plants in India, Africa, West Asia and Latin America.

Interest in Minority Stake KKR, Carlyle and Singapore’s Temasek are reportedly in the running to pick up a minority stake in Lafarge. The three firms, along with TPG Capital, were in the initial stages of conversation with Lafarge India management. Reportedly, the company is planning to offload a 20 percent stake to finance growth plans worth RS 6000 crore.

The French cement maker entered India in 1999 and since then has gained a commanding share in the ready-mix concrete business. It currently operates four plants with a capacity of around 8 mtpa with cement facilities located at Sonadih, Jojobera, Mejia and Arasmeta. The company’s cement manufacturing capacity has increased from 6.5 mtpa in FY 10 to 8 mtpa currently.

Final Deal Nears Completion The Jaypee Group is expected to close its acquisition of Aditya Birla Group’s cement units in Gujarat and a decision is expected at any time. The Birlas have offered close to US$160 per ton of capacity and Jaypee and its bankers are going through the offer.

The earlier deal in the industry between

Holcim and ACC was signed at an acquisition price of US$200 per ton of capacity.

Reports suggest the talks are centered on final valuation of the unit. “There is an issue over the valuation of the units from the Birlas’ side, who think the units are expensive. The Birlas are negotiating hard and have made the final offer,” a source familiar with the negotiations said.

The Birlas will be paying close to US$800 million or RS 4,357 crore for the units, which will help the Jaypee Group retire its debt.

Royalty Fee Hike ACC’s board has agreed to increase the payment of technology and knowledge fees to its parent firm, Holcim of Switzerland, by one percent of its net annual sales of the company. The move took effect on January 1. The proposal will be presented to ACC’s shareholders at the next annual general meeting, the company said in a statement after the board meeting.

Holcim, which holds 50 percent stake in both ACC and Ambuja Cements, had ear-

lier proposed two percent as a technology fee but the independent directors of both companies rejected this in October, indicating the company does not require a very high technology transfer from Holcim.

Ratings Change India Ratings has revised its outlook for Indian cement manufacturers to “stable to negative” for 2013 from “negative” in 2012, saying it was driven by limited downside risk for demand. The ratings agency also expects consolidation in the medium to long term with large M&A activities.

The agency expects credit profiles of large cement firms with superior cost position and pan-India presences to remain stable in 2013; however, smaller companies with unfavorable cost structure and regional concentrations are likely to be under pressure.

Emkay Gets Bullish Madras and Shree Cement are likely to outperform larger caps this year, on the back of more efficient production and operations. That is according to Anish Damania, the Head of Institutional Equity at Emkay continued on page XX

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CONSTRUCTION materials

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nfrastructure & projects

Government approval comes through for several state infrastructure projects. Housing projects on the horizon in Mumbai and Gujurat. Clearance is given for the construction of India’s second seabridge, the Mumbai Trans Harbour Link (MTHL) project in Mumbai.

NEW PROJECTS Government funding for infra projects The Kerala government is set to fund key infrastructure projects in road, monorail and other sectors. The state government will invest a total of RS 10,710 crore in different projects in the state. Out of these, the government has allotted RS 1,760 crore to the Kozhikode monorail project, to be completed in the next four years. The state cabinet has approved an investment of RS 4,000 crore in the development of 1,204 km of roads, which include development of state highways and district roads.

Palm Land project In a joint venture with Sheetal Infrastructure, Infra India and Ajmera Realty will launch a second home project called Palm Land in the outskirts of Ahmedabad. With an estimated cost of RS 180 to 200 crore, the project is spread over 45,000 square yards of developing area and comprises 434 villas. The project is aimed at the segment of affordable second homes where each home will be priced between RS 27 to 35 lakh.

TN road infra projects The Tamil Nadu State Highways Depart-

32 JANUARY / FEBRUARY 2013

ment is all set to implement road infrastructure improvement projects worth RS 10,000 crore across the State. The project is a part of modernization and upgrading quality of roads. The TN government also has plans to turn 2,000 km of roads into six-lane or eight-lane and has devised strategies for two-laning all roads in the State at a cost of RS 1.33 lakh crore over the next 10 years.

Approval of road projects in Bihar, J’khand and Orissa The Union Government approved widening of two highway projects in Bihar, Jharkhand and Orissa. The project involves widening of roads at an expenditure of RS 5,652.03 crore. The project includes widening of Patna-Gaya-Dobhi section at a cost of RS 2,015.60 crore and widening of Baharagora-Sambalpur stretch in Orissa and Jharkhand at a cost of RS 3,636.43 crore.

Affordable homes in Gujarat Tata Housing, part of Tata Group, signed a MoU with the Gujarat government to invest RS 3,500 crore to build affordable houses in Gujarat. The project involves construction of over 6,000 housing units spread over 100 acres and is being developed under the public-private partnership

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Kandla Port project approved The Cabinet Committee on Infrastructure (CCI) approved an RS 622 crore project for development of Single Point Mooring (SPM) at Kandla Port in Gujarat. The project will be built on a build, operate and transfer (BOT) basis and will have a concession period of 30 years. The proposed project will enhance the port’s capacity by 12 million tons per annum to 104 million tons per annum.

Mumbai housing Engineering and construction giant, Larsen & Toubro is set to construct the largest residential project in Mumbai. The company is planning to invest RS 500 to 600 crore in a residential project on its 20 acres of vacant land on its Powai campus in Mumbai. The project is estimated to yield RS 5,000 crore in sales for the company.

Expressway projects cleared The State governments of Delhi, Punjab and Haryana cleared the construction of the 357 km Delhi-Ludhiyana Expressway. The project involves an investment of RS 20,000 crore and would be the second expressway after Delhi-Jaipur Expressway. The governments also plan to develop townships alongside the expressway nodes. The cost of the expressway per km is estimated to be RS 40 crore whereas RS 5,000 crore has been allotted for land acquisition.

New market player Bangalore-based infrastructure and property management company Ezzy Group is set to invest more than RS 650 crore in the Indian realty segment over the next two years. The company plans to construct both residential and commercial buildings in Mumbai and Bangalore and to fund the projects through foreign direct investment.

The group already has invested around RS 150 crore in construction of luxury residential villas and apartments in Bangalore.

Construction materials: infrastructure & projects

(PPP) model. The project is a part of the Gujarat government’s plan to construct over 28 lakh affordable homes in rural areas and 22 lakh homes in urban areas in the next five years.

Infrastructure and Construction Projects/Expansion Table

NAME OF PROJECT

COST IN INR

LOCATION

Aranmula Airport Project

2,000 crore

Aranmula/Kerela

GMR commences two highway projects in Andhra Pradesh

n/a

Andhra Pradesh-HyderabadVijaywada /Hungund-Hospet

Construction of Bareily-Sitapur Road Project

1,951 crore

Uttar Pradesh - Bareily-Sitapur

Mumbai Trans Harbour Link Project

n/a

Mumbai

Key infra projects in Kerala

Table available incrore the 10,710 180-200 crore iccm Print Edition.

Kerala

Infra India & Ajmera Realty's Palm Land Project

Gujarat- Ahmedabad

10,000 crore www.cemweek.com/subscribe

TN govt to implement road infra projects

Tamil Nadu

Road projects in Bihar, J’khand and Orissa

5,652.03 crore

Bihar, J’khand and Orissa

Tata Housing Project

3,500 crore

Gujarat

Construction project at Kandla Port

622 crore

Gujarat

L&T's housing project

500-600 crore

Mumbai

Expressway projects in Delhi, Punjab and Haryana

20,000 crore

Delhi, Punjab and Haryana

Ezzy Group Realty projects

650 crore

Mumbai, Bangalore

Brigade to construct premium villa project

n/a

Mysore

Premium villa project in Mysore Brigade Group launched its first premium villa project known as Brigade Palmgrove in the city of Mysore. The project, which is spread over an area of 14 acres, involves construction of 72 well-planned spacious premium villas and townhouses. The area of the villas and the townhouses will range from 4070-4090 square feet respectively. update on PROJECTS Aranmula Airport project approved The private sector KGS Aranmula International Airport project in Kerala has received a final in-principle approval of the Kerala government. The proposed project already had received all the necessary clearance from the central government. The proposed RS 2,000 crore airport is to come up in an area of 500 acres. The project is expected to be complete in two years’ time.

GMR starts highway projects GMR Infrastructure has started commercial operations at the Hyderabad-Vijaywada section of NH-9 and Hungund-Hospet of NH-13. The projects were awarded to the company by the NHAI through an international bidding on a DBFOT basis in

2010 with a concession period of 25 years.

The two new projects are anticipated to generate revenue of RS 75 to 80 lakh and RS 18 to 20 lakh respectively per day.

Bareily-Sitapur Road Project delayed The construction on the Bareily-Sitapur Road Project has been delayed because of issues over handling of land. The project, which involves 4-laning of the existing 2-lane road between Bareily and Sitapur in Uttar Pradesh, is implemented by NHAI; BHPL, a SPV floated by Era Infra Engineering, and OJSC-Sibmost at a cost of RS 1,951 crore.

Clearance given The Central government has given its clearance for the construction of India’s second sea-bridge, the Mumbai Trans Harbour Link (MTHL) project in Mumbai.

The government sanctioned the Viability Gap Funding worth RS 1,920 crore. The proposed project will connect Sewri with Nhava Sheva in Mumbai and Navi Mumbai and provide quicker access to the proposed Navi Mumbai International Airport.

The planning authority is now inviting tenders for the project.

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construction materials

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quipment updates

XCMG launches a new lattice boom truck, the largest in the Chinese market. Doosan introduces a new 42-ton crawler excavator. Terex adds a new rough terrain crane and backhoe loader to its product offerings.

Sany launches Crawler Crane Sany America has launched a new 550-ton crawler crane for energy, petrochemical and infrastructure projects. The new crane – Sany SCC8500 – has lighter overall weight, transports like a 400-ton machine and can be mobilized quickly on the job site. The new crane from Sany has filled the niche between existing 400ton and 600-ton class machines and is a viable construction solution for large infrastructure projects.

Shantui adds V Series Forklifts Shantui is expected to launch V Series forklifts. The company already has finished the development and trial-manufacturing of the new forklifts, which can be used widely in the station, port, airport, factory and warehouse setting. The new forklifts will have a low center of gravity that will provide stronger stability and ensure flexible and comfortable operation.

allows stable work especially when a largecapacity bucket is equipped. The highstrength machine body of SH460HD-5 suits the mining works better. The new excavator consumes 10 percent less fuel and has an increased working capacity of 19 percent per hour.

Liebherr 81K crane Morrow introduced the new Liebherr 81K crane to the North American market. The ease of use, lifting capacities and versatility of the new crane will benefit building contractors, manufacturers and material handlers. The launch of Liebherr 81K is an addition to the existing product line of

New mining excavator Sumitomo has introduced a new mining excavator – SH460HD-5.

The new excavator is upgraded based on the company’s SH460HD excavator.

The counterweights of the upgraded model are 600kg heavier than SH460, which

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Morrow, which is the exclusive distributor for Liebherr.

New Terex additions Terex has launched a new rough terrain crane.

The 100-ton crane Quadstar 1100 features a 47.24-meter, five-section main boom plus 8.8 to 16.7 meter bi-fold swingaway extension.

The crane is powered by a six-cylinder Cummins diesel and features three-mode steering and 18-degree hydraulic tilting cab for better visibility. The double keel boom can be extended for long and short radii for higher capacities.

construction materials: EQUIPMENT UPDATES

Terex also has added a new product to its backhoe loader range. The new loader – TLB890 – features a curved boom, a hightorque 74.5 kW (100hp) engine and highpressure hydraulics, which guarantees improved tear-out forces and cycle times.

It also features a new “Deep Dig” inner slide extending dipper stick that speeds working. The curved boom design of the loader allows trucks to be positioned closer to the machine for short loading cycles.

The TLB890 digs deep, has excellent maneuverability and provides economical yet powerful performance.

Largest lattice boom truck crane XCMG unveiled its 1000-ton lattice boom truck crane – the XCL 800. The XCL 800 is a pioneer model as it combines XCMG’s all-terrain crane and lattice jib design. It is now the largest lattice boom truck in the Chinese market built on eight axles and has filled the gap in the Chinese domestic market.

First tire paver China’s leading construction equipment maker Shantui has expanded its road machinery by launching its first tire paver – the SRP60T. The new paver tire is equipped with a full hydraulic drive with front-wheel auxiliary drive, Cummins engine, imported controller and advanced electro-hydraulic control. The SRP60T can easily climb a slope of 20 percent grade at a maximum speed of 15km/h.

Deere’s new crawler loader John Deere launched its new 605K crawler loader. The new loader powered by a DeerePowerTech 4.5-liter, Tier 4 interim diesel engine features a hydrostatic transmission, which provides dynamic braking, infinite speed control, power turns and counter rotation while staying in gear and power management. The 605K also features a rear ripper for turning materials and a comfortable, quiet cab with larger doors and an air suspension seat.

42-ton crawler excavator Doosan Construction Equipment has launched a 42-ton crawler excavator. The

new DX420LC-3 is designed to handle a host of applications such as road building, heavy earthmoving, demolition, large-scale material-handling, quarrying and civil engineering. The new highly responsive joystick controls provide excellent true controllability for the operator. Compared to the previous models, the new excavator features new hydraulic pumps and valves. These new pumps and valves have increased main pump flow by 6 percent, which provide a combination of higher overall pressures and hydraulic flow for easy traveling, smoothness and increased comfort.

105-ton bulldozer Shantui, famed for their bulldozers, launched a 105-ton bulldozer in China. A 708KW Cummins engine powers the new bulldozer. The new bulldozer features a 6.5m wide blade and has a cubic capacity of 45m3 with a 4.5m of ground contact track.

The modular design makes assembly and

disassembly easier as well as allowing for easy maintenance.

New 100NS excavator IHI unveiled its new 100NS excavator in China. The new excavator from IHI features a super-large cab with horizontal seat, a high-power engine equipped with supercharger and open type engine hood. The new excavator is a perfect combination of digging force and speed, and can be applied to urban and rural road construction, earthwork and small mines.

Lishide’s new excavators Lishide has launched three new hydraulic excavators. The new products successfully passed appraisal at Linyi Municipal Commission of Economy and Information Technology. The new products have reached the internationally advanced level in engineering machinery products, and are reported to garner praise for the company in the international market.

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market impact

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oal updates

Concerns are raised over discounts to power companies. Targets for coal production in FY 2012-13 are set. Failure to finish important railway lines in the southern states could jeopardize future coal production targets.

Andhra Pradesh, Tamil Nadu and Karnataka and many northern and western states if important railway lines connecting coal fields in Jharkhand, Orissa and Chhattisgarh are not completed in the next three years.

Concerns Over Discounts India’s Finance Ministry has raised concerns over the proposed discount on the reserve price of coal mines to be offered to power companies. “The Finance Ministry wants to understand the entire allocation process – the revenue to be generated by allocating these mines and if power producers should be offered a discount,” a senior government official said.

According to one report, the Finance Ministry query has come as a surprise because the government has been saying that the auctioning of coal blocks is not targeted as

revenue generation. The Power Ministry has mooted a proposal to offer a 90 percent discount to power producers on the reserve price for coal mines.

Its view is to facilitate cheap coal to power producers that would keep electricity tariffs low. At the same time, the Steel Ministry has not sought any discount on coal mines, as steel manufacturers are free to price their products at market rates.

Serious Implications India’s Coal Ministry has predicted serious implications for the southern states of

The Coal Ministry stated it would not be possible for state-run Coal India Limited (CIL) to achieve either the targeted production of 615 million tons of coal by 2016-17, or any incremental coal production during the 12th Five-Year Plan, if the railway tracks in these three coal-producing states were not put in place within the next three years.

Coal Production Enhancement In order to fast track development of coal blocks in the country, the government has proposed to develop some of the CIL coal blocks through the mine developer and operator (MDO) approach. Modalities are being worked out in this regard. This was stated by Shri Sriprakash Jaiswal, Minister of Coal, at the inaugural session of the 7th International Exhibition and Conference on Power Sector.

He said that efforts were being made to enhance exploration for enlarging the continued on page 40

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market impact

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ulk material handling

Imerys Ceramics to further expand its Nadiad facility. JV Tata Hitachi Construction seeks to expand market share. ACC introduces two new concrete products geared to speedy road repair.

Gujarat Facility to Expand Imerys Ceramics India will expand its facility at Nadiad, Gujarat, this year and also acquire new mines. The Hyderabadbased company, provider of raw material and industrial minerals to ceramics and other industries, will invest RS 2 crore on expanding capacity at the Nadiad-based blended clay platforms.

Imerys India also is looking to acquire new mines for potash feldspar, soda feldspar and quartz in Gujarat and Rajasthan.

Currently, the company owns and operates seven mines in Andhra Pradesh.

Bigger Share Tata Hitachi Construction Equipment Machinery Company is seeking a bigger share of India’s equipment market, while increasing exports. The 40:60 percent venture of the Tata Group and Japanese conglomerate Hitachi expects to grow its share to about 42 percent over the next three years by launching new models and offering enhanced ownership experience, Rana

Sinha, Managing Director of Tata Hitachi venture, said. The company currently has a share of about 37 percent.

New Concrete Products ACC has introduced new solutions for speedy road repairs. ACC Concrete launched two new solutions to meet the burgeoning need for speedy road repairs, and introduced UTWT24 and Speedcrete products to cater to the demand for instant road surface overlay and repair in India.

The products can be laid in depth ranging from 100mm-150mm for road sections in India. “Speedcrete is an integrated high performing novel solution from ACC Concrete for planned instant road repairs.

A delivery of Speedcrete is treated with utmost care and completed by experienced personnel with special techniques before trafficking in 8 hours,” Hans Fuchs, Managing Director, ACC Concrete, said.

Designed as complete solutions, UTWT 24 and Speedcrete allow roads to be trafficked within 24 hours and 8 hours respectively from the time of application. The products were launched during a demo-seminar organized by ACC Concrete at its ACC Thane Complex near Mumbai.

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during winter. The trend is expected to get a big push in the first quarter (JanuaryMarch), aided by the current cold conditions,” said Pranav Khurana, a freight analyst with Louis Dreyfus Commodities.

continued from page 38: Coal Updates

resource base for coal. Against an actual growth of 3.8 percent achieved in the 11th Five-Year Plan, CIL has been asked to target a growth rate of 7 percent during the 12th Five-Plan to ensure more availability of domestic coal resources.

With regard to coal importation and price pooling, the minister said that a proposal to import coal with pooling of prices is suggested to bind over the current shortage situation, but this needs to be studied in depth for a considered view as a number of state governments have expressed their reservations about the proposal.

Coal Imports India’s coal imports may rise by half to around 16 million tons in January from a year earlier, mostly due to the severe cold weather. The northern region has been witnessing the coldest weather in at least 44 years, which has led to numerous deaths.

Traders currently expect January imports to be up 10-15 percent from December, estimating 14.2 million tons last month and 13.8 million in November. A year-ago January, imports were 10.7 million tons.

“Imports have been on the rise since October to meet the higher energy demand

38 JANUARY / FEBRUARY 2013

Coal Production Targets Set India has set the target of coal production for the financial year 2012-13 at 578.10 million tons against the actual production of about 540 million tons achieved in 2011-12. This is a growth of 7 percent over the previous year. Actual production during the period April-November 2012 has been 330.61 million tons, which is about 93 percent of the target for this period, registering a growth of 6.4 percent over the corresponding period of the previous year.

The target for coal offtake for the current financial year 2012-13 has been set at 585.60 million tons. The actual coal offtake during April-November 2012 has been about 360 million tons, indicating an achievement of 95 percent of the target for this period, registering a growth of 7.8 percent over the corresponding period of the previous year.

The coal offtake to power during AprilNovember 2012 from Coal India and Singareni Collieries has been about 237 million tons, indicating an achievement of 92 percent of the target for this period.

Growth registered 12 percent over the same corresponding period.

End Monopoly India Planning Commission Deputy Chairman Montek Singh Ahluwalia has called on the government to denationalize the coal sector and end Coal India’s monopoly.

“Look at other fuels like oil and gas, they are not nationalized. Coal is certainly less precious and important than them, yet there is no nationalization of the oil and gas sector but the coal sector is nationalized,” said Ahluwalia.

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continued from page xx: M&A and Finance

Global Financial Services.

“In the cement stocks, I was just doing some work and I found that the cement story that started about nine quarters ago has bottomed out, and we saw about 80-90% run in almost all the cement stocks and that coincided with seven quarters of continuous high double-digit growth coming from quarter 4 FY11. So that continued right till quarter 2,” said Damania.

“If we are going to see at least two quarters of pain, then the current valuations do not take that into account and the stocks will correct some degree, another 5% to 10% from these levels if that is the case.

On the midcap side, obviously things could be little different. So we continue to prefer Madras Cement and Shree Cement in the pack and those are the stocks which we feel will probably outperform the larger caps,” he added.

Damania went on to say in a recent news story that, “On a YOY basis, we are seeing about 1% or 2% increase in EBITDA and about 3% increase in PAT coming down from 94%, one of the very high numbers which we had seen over last seven quarters, and I am not so sure whether the 4th quarter will pan itself out to show better numbers. We did some analysis, we took a 2% price increase, we took a 2% cost decline and we took a 15% quarter on quarter volume growth which is the highest on a 3rd quarter to 4th quarter basis and it still works out to flattest numbers on a YOY basis.”

regional news

Pakistan looks to Afghanistan to boost its export sales as cement manufacturers brace for a potential price increase thanks to the National Highway Authority’s recent policy change. A river transportation strike idles ships in Bangladesh. And, Lucky Cement looks to expand operations into Sri Lanka.

Pakistan Tajikistan has reportedly barred construction firms from using cement sourced from Pakistan, because of the inferior quality.

This is after the director of the Agency for Construction and Architecture, Abduvali Komilov, said Pakistani cement was inferior to the quality of similar products made in Russia, Ukraine and Tajikistan. While the Tajikistan market may be a bust, Pakistan is counting on the Afghani market to boost cement sales.

Pakistan’s National Highway Authority (NHA) has changed its policy and will be charging transporters a double toll rate, forcing them to cut down the load of goods, a move that will likely have an upward effect on cement prices in the country. According to one report, the Motorway Police has imposed an impractical restriction on truck owners. Sources said this decision alone would push the price of cement up RS 10 to RS 30 a bag across the country.

According to data, cement makers in Pakistan shipped 2.41 million tons of cement to Kabul during the last six months. Exports to the capital of Kabul showed 11.7 percent YOY growth. Exports from Pakistan to Afghanistan accounted for 62 percent of total exports. In contrast, exports to India declined by 44 percent and other markets largely remained unchanged.

Bangladesh Cargo transportation in Bangladesh’s Chittagong port came to a standstill in midJanuary as river transport workers continued their strike. At least 15 mother vessels sat idling with import cargoes in the outer anchorage and port jetties due to suspension of carrying goods by lighter vessels to different destinations of the country, port

sources said. The idled vessels are carrying fuel oil, sugar, urea fertilizer, salt, cement clinker, wheat and steel billet.

According to media reports, apart from the impasse in cargo delivery through river routes, the strike has caused financial loss to the tune of about TK200 million per day to those concerned with transportation.

Sri Lanka Lucky Cement, Pakistan’s largest cement producer, is considering the construction of a 500,000 ton grinding plant in Sri Lanka. CEO Muhammad Ali Tabba confirmed that the company had sought state land to build a US$20 million plant.

Lucky Cement joins Tatta Cement, another Pakistani manufacturer that already has received approval to build a grinding plant in Sri Lanka’s Hambantota port. BMWeek CemWeek

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

BMWeek BMWeek

CW Group BMWeek JANUARYCemWeek / FEBRUARY 2013 CemWeek CW Group BMWeek CemWeek BMWeek CW Group

CemWeek CemWeek

39 Week Coal Coal Week Coal Week

analyst recommendations ratings changes

AMBUJA CEMENT (ACEM) With the most attractive regional positioning and strongest balance sheet among its peers, Ambuja Cement is expected to maintain its growth momentum within the industry. Networth Stock Broking has recommended a “BUY” rating with a target price of RS 250 on ACEM based on the company’s cost leadership, sustainable returns, robust earnings growth and strong balance sheet, which are expected to drive its CY13E EBITDA. The company’s volume growth is expected to improve to 9 percent CAGR over CY11-13 against 5 percent CAGR over CY09-11. Healthy demand scenario in the North and West, softening interest rates, increased investment in infrastructure and government spending are seen as the key drivers.

Date

Broker

Company

Rating

Target Price (Rs)

Current Market Price (Rs)

Ambuja Cement

Buy

250

218

India Cements

Hold

110

97.5

India Cements

Hold

103

98

13-Nov-12

Networth Stock Broking

5-Nov-12

Religare

6-Nov-12

Emkay Global Financial Services

6-Nov-12

Kotak Securities

India Cements

Reduce

97

92

21-Dec-12

Microsec Capital

JK Cement

Buy

395

337

Networth Stock Broking

JK Cement

Buy

400

319

Madras Cements

Accumulate

245

204

Mangalam Cement

Hold

193

180

5-Nov-12

15-Nov-12

Emkay Global Financial Services

SPA Securities

MANGALAM CEMENT (MCL) Mangalam Cement posted a sharp surge in volumes and reported significant improvement in operational parameters. The company expanded its EBIDTA/tn significantly to RS 823/tn in Q2 FY13 from RS 202/ tn in Q2 FY12 and RS 765/tn in Q1 FY13 led by higher cement prices. SPA Securities recommended a “HOLD” rating with a target price of RS 193, upgrading it from current market price (CMP) of RS 180.

The company’s top-line growth rate of 30.8 percent YOY was higher than many people expected. The EBIDTA/tn improved by 4.1x YOY (+7.7% QOQ) mainly on account of higher realizations and lower operating cost. The upcoming cement capacity (0.50 mt and 1.25 mt by April 13 and October 13) are seen as the key drivers in the next leg of growth.

MADRAS CEMENTS (MC) Emkay Global Financial Services has recommended an “ACCUMULATE” rating for Madras Cements with a target price of RS 245, upgrading it from CMP of RS 204. The recommendation has come based on the solid quarterly performance of the firm. The company posted higher than estimated quarterly results. In the Q2 FY13, revenue and EBITDA increased 22

40 JANUARY / FEBRUARY 2013

and white cement. JK Cement, one of the largest cement manufacturers in North India and second largest producer of white cement in India, achieved an EBITDA per ton of RS 881, an increase by 84 percent (YOY). The better results are largely attributed to good volumes and price hikes.

INDIA CEMENTS (indiacem)

percent and 18 percent respectively on the basis of year-on-year comparison. Volume grew 11 percent YOY driven by healthy offtake in states such as Kerala, West Bengal and Tamil Nadu.

JK CEMENT (jkcement) Microsec Research has recommended a “BUY” rating on JK’s stock, with a target price of RS 395. Networth Stock Broking also confirmed a “BUY” rating for JK stock, with a target price of RS 400.

Both Microsec and Networth pointed to the company’s expansion plans to act as a growth driver in future. The company is optimistic about doubling its output by 2016-17 by expanding its business in grey

CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week

Religare Securities has downgraded its recommendation to “HOLD” on India Cements stock on limited upside and concerns related to lower margins. Emkay Global Financial Services has maintained a “HOLD” recommendation considering the dismal profitability, increasing leverage and sub-optimal return ratios. Kotak Securities also retained its “REDUCE” recommendation for India Cements based on lower than estimated operating margins and low demand growth in the southern region. Although India Cements registered a growth of 6.7 percent YOY in its revenues, the high energy costs dragged EBITDA by 18.6 percent YOY, declining 19 percent YOY and 26 percent QOQ, significantly lower than the estimates. However, Kotak Securities predicts the stock will get re-rated once demand improves in the southern region.

Most popular on CemWeek.com The most-read stories on CemWeek over the past two months reflect the industry's mixed outlook. The India column shows the most popular stories from CemWeek featuring India-related coverage, and the Global column shows the global events that gathered the most attention worldwide during the period. Visit CemWeek.com to access the full stories.

India

global

1 India’s Ambuja Cement looking to build plant in Bengal

1

Germany’s Polysius to merge with handling unit

2 Report: Ultratech in talks to acquire JP cement business

2

Egypt cement demand to hit 50 mm tons

3 Jaypee, Aditya talks on cement plants in final stages

3

Production at new plant to begin next year in Azerbijan

4 Slow pickup cuts India cement prices

4

Undeveloped cement plant causes stir in Senegal

5 ACC awards plant construction deal to McNally Bharat

5

New cement plants in Brazil to create thousands of jobs

6 India: ACC agrees to hike royalty fees to Holcim

6

Pakistan’s Thatta starts power production

7 India to hear complaints on idle cement capacities

7

KHD wins Turkey order

8 Loesche India appoints new head

8

Saudi Cement starts up new clinker line

9 India’s RINL looking to build cement plant

9

Binani to sell off 40% stake to finance expansion

10 CRH to continue expansion plans in India

10

Lafarge cutting kiln temperature for clinker production

11 India’s Promac, Japan’s TEC in JV deal

11

New cement plant to rise in Peru

12 ACC rejigs supply chain management

12

KHD wins order from Holcim India unit

13 CRH, Holcim jockeying for India’s Shriram cement unit

13

China hit outdated production technology goal last year

14 India’s ABG looking to unload minority stake in cement

14

Start of construction season cutting Saudi supplies

15 Shree Vinayak to expand Jharkand based unit

15

Kenya cement makers in fierce market access war

16 Analyst sees upside for JK, Mangalam Cement

16

LVT to build coal storage unit for Thailand’s SCG

17 ACC rejigs supply chain management

17

Workers instigation in Egypt over diesel prices

18 CRH, Holcim jockeying for India’s Shriram cement unit

18

Holcim inks deal with Trimble for cargo solutions

19 India’s ABG looking to unload minority stake in cement

19

Saudi’s Eastern Cement to buy out Spanish partner

20 India Cements profits slide in Q2

20

Cementos Portland gets environmental nod

RESEARCH

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