india CemWeek A CemWeek Publication
Cement
issue 13 july / August 2013
& construction Materials
SPEED Logistics synergies for India’s ACC
NEW INDIA CEMENT PLANTS
SURVEY SNEAK-PEAK Highlights from the 4th Annual India Cement Sector Survey
To support INR 50 trillion worth of infrastructure developments News
|
Analysis
|
Market Coverage
|
Interviews
|
People Moves
cbi conference
cement business & industry india & south asia October 9-10, 2013 • Hilton Mumbai International Airport Hotel • Mumbai, India CBI India & South Asia 2013 Conference 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 on-line at www.gmiforum.com or email sales@gmiforum.com. You may also call us in the US at +1-203-516-7424 supported by
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FEATURES 4
departments
ACC Limited Innovates Logistics Management
1
Editorial Letter Monsoon Time No Quiet Time
cemweek publisher head of cw group reasearch
Achieving logistics excellence
8
New Cement Projects to Support India’s Infrastructure Plans Cement Business on Expansion Spree
14
Highlights From the 2013 India Cement Sector Sentiment Survey Optimism is the name of the game
research & analytics 18
South East Asia Focus India consolidates its trading position
22
Coal market update
23
Energy price update
26
Table Summary
construction & building materials 40
4
Infrastructure & Projects
CemWeek rOBERT MADEIRA CemWeek TUDOR MIRCEA CemWeek ANTHONY FITZGERALD BMWeek BMWeek BMWeek
2 27 42
Numbers in Brief Cement Production Slides in Wake of Monsoon
Event Highlights from CBI Africa
Analyst Recommendations Latest Broker Recommendations
cement 28
Market and Competition
30
MA & Finance
32
Projects & expansions
34
Volume and Pricing
35
Equipment Highlights
36
People
38
Regional News
editor
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letter from the editor
monsoon time no quiet time Another monsoon season has settled in and the quiet period that Indian cement industry used to go through each year around this time is nowhere to be seen. And frankly, it couldn’t be any other way. The industry is witnessing the most important operational alignment of its recent history. Not unexpectedly, cement major Holcim has finally went through with the decision to join its two Indian arms, Ambuja and ACC, under a single corporate unit. The move will result, among others, into a consolidated market presence and into an effective use of local synergies in terms of common corporate services. Synergies usually translate into operational cost savings. Only from Holcim’s decision to join Ambuja and ACC are expected to emerge some 900 crore savings, while other producers, such as Lafarge, are currently looking at new methodologies to analyze and optimize maintenance costs.
That’s why we decided to examine in more detail, through a series of features and analysis, several business processes which are likely to lead to synergy generation along the value creation chain in the cement industry. In the current issue we feature as an example the way which one of India’s cement big 3, – ACC, has managed to leverage modern RFID technology as part of its network distribution optimization effort to better align its operations, save time for business partners and generate cash savings. Expect more on this front from both us at India Cement and Construction Materials Journal and our partners at the CW Group. Synergies also emerge when similar individuals or entities work together for a common purpose with a similar state of mind. The 4th edition of the Annual India Cement Sector Business Sentiment Survey is out and explores the synergic ties and views binding together the minds
of executives and professionals making up the industry. In our overview of the survey’s results, we bring forward its main points and highlight the main differences compared to the previous edition. Besides our usual department coverage, we also take a look using consolidated facts and figures at the regional evolution of cement prices and of the fuels used in the industry – coal, petcoke and natural gas – with the help and input of CW Group’s Research & Analytics team. And last but not least, ICCM welcomes your input. If you are interested in contributing to ICCM with an article, or simply want to share your feed-back, contact us at editor@cemweek.com.
tudor mircea editor
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NUMBERS IN BRIEF India’s cement production slides
in the wake of the monsoon After a new 24.3 million tons historical maximum in terms of monthly cement production in March 2013, the Indian cement market entered its typical pre-monsoon decline, with volumes shrinking to 22.5 million tons in April 2013 and 21.4 million tons, in May 2013. Indian cement companies produced around 112 million tons of cement in the first five months of the year, with the YTD growth rate expanding an 8.4 percent increase over 2012. CEMENT PRICES (RS PER 50 KG BAG) SOUTH
WEST
EAST
CENTRAL
NORTH
350
250
MAR-12
APR-12
MAY-12
JUN-12
JUL-12
AUG-12
SEP-12
OCT-12
NOV-12
DEC-12
JAN-13
FEB-13
MAR-13
APR-13
SOURCE: CW Group Analysis
300
MAY-13
As expected, the steep price increases imposed in February 2013 were not there to stay. Price decline in March and April was followed by a slight recovery in May. India-wide, cement prices went up by around Rs15 per bag in May 2013, gaining approximately 5 percent over April 2013. The most important hike was registered in the southern region (13.9 percent), where for the second time in the last twelve months, prices came dangerously close to those of the eastern region, the territory with highest cement prices in all India. Southern’s Andhra Pradesh region remains the most affected area, with skyrocketing price increases and fierce supply shortages. PAN INDIA CEMENT VOLUME (TONS) 2009
25,000,000
2010
2011
2012
2013
10,000,000
JAN
2 JULY / AUGUST 2013
FEB
MAR
APR
MAY
JUN
CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
JUL
AUG
SEPT
OCT
NOV
DEC
SOURCE: CW Group Analysis
17,500,000
The resource for global cement prices The Cw Group's Global Cement Trade price report includes current pricing for cement delivered through the retail channel as well as import and export pricing for major markets around the world. worldwide monthly cement prices
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Mediterranean basin North America & Caribbean East & Southeast Asia And other regions
Global import and export cement prices: ■ Major market trade flows ■ FOB export prices ■ CIF import prices
Global market cement prices. Import & export trade prices. All in a single must-have resource.
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Single user: USD2,300 Multi-user (max 3-users): USD3,800 Corporate use: Upon request
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feature
ACC Limited Innovates Logistics Management
Renowned as one of the pioneers of the cement industry in India, ACC Limited was founded in 1936 as a merger of ten cement companies and is now considered the leading cement and concrete manufacturer in the country with 16 cement factories and more than 55 ready mix concrete plants. The company and its subsidiaries also are engaged in the mining of limestone and coal blocks to support its cement and concrete operations. ACC Limited is part of the worldwide Holcim Group
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CC is regarded as an innovator in the industry as it continues to pursue advancements in concrete and cement technology. The company’s vision is to be one of the most respected companies in India and to be recognized for challenging conventions and delivering on its promises. LOGISTICS EXCELLENCE While the company does focus on product quality and innovation, it also believes in the constant improvement of management process to meet its vision. In March 2012, ACC launched a structured program called “Speed” with the objective of developing a new logistics management program thatwould stimulate efficiency and productivity along with saving fuel costs and time. Speed was initially launched in ACC’s Tikaria plant in Sultanpur where approximately 600 trucks were usually lined up for loading cement at any given time, 500 outside the plant gates and 100 inside the plant. With such a huge fleet, the company deemed it necessary to develop a way to implement a more efficient loading process to reduce the queuing time of trucks outside the plant. After the implementation of Speed, the number of trucks waiting in line was reduced to less than half. Currently that number is around 230 trucks total. The success of the project is primarily attributed to the deployment of radio frequency identification (RFID) and the installation of global positioning systems (GPS) on the cement trucks. RFID measures the time taken by a truck to move from the entrance gate to the exit gate and tracks historical data. Prior to the use of RFID, a truck usually took 220 minutes to load cement within the plant. This improved dramatically to 75 minutes with the use of RFID. On the other hand, GPS tracks movement of the trucks outside the plant to ensure timely delivery and faster vehicle turnaround. Both RFID and GPS provide better visibility of the trucks, which translates to
easier supervision and better logistics management. The company reported savings of about 5 percent in operational cost in the Tikaria plant due to the adoption of the new program. Not only was the company able to save on transportation costs, but it was also able to improve asset utilization The fixed cost of each truck was significantly reduced with utilization now up to 6000 kilometers per month from 4000 kilometers previously. The program likewise complements the company’s efforts to reduce the impact of its operations on the environment. The efficiency in its transport system means less fuel consumed and less emissions that may contribute to air pollution. Following the success of the Speed project in Tikaria, ACC subsequently adopted the program in two more plants in West Bengal and Karnataka. About 1000 trucks from the three plants are now equipped with GPS systems. As the company plans to roll out the program to all its 16 plants in two years, another 9000 trucks will be equipped with GPS in various phases. We spoke to ACC’s Logistics DirectorNorth, Mr. Deepak Gulati, to learn how the project has helped the company to improve the performance of the distribution fleet and what ACC sees as the biggest logistics challenges the Indian cement industry will face in the future. CemWeek: What technology choices were made and why? Deepak Gulati: We chose RFID (Radio Frequency Identification) technology, which is extensively used in the identification process with the help of a card and a reader. The choice of this technology was obvious – it is a fast emerging nextgen technology that uses radio frequency waves to transfer data between a reader and a moveable item. The technology assures tracking, access control, identification and better supply chain management. It helps in tracking the item on real-time basis. RFID technology offers several significant
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feature
advantages over barcodes (which are also capable of supporting automated data capture). Some of these are: ■■ Barcodes have to be manually scanned, keeping them close to the reader. An RFID tag, bearing a unique identifier, can be scanned from a much longer distance. ■■ RFID tags can hold more data compared to barcodes. ■■ Expanded reading range supports quicker reading and faster processing. ■■ Facilitates rapid product movement. ■■ Continuous data reading, writing, modifying, adding and deleting information ■■ Readability of RFID tags is better in adverse conditions such as dirt and outdoors – it makes an obvious choice for an industry like cement. ■■ RFID allows us to measure detention time at each stage of truck loading and thus the utilization of assets within the plant.
600
0
Outside Inside
Before
efficient utilization of the assets (trucks) and ensuring customer delight. In short, the acronym SPEEDS.
CW: What was the value creation in terms of overall plant and logistics management?
ACC’s Tikaria plant loads around 500 trucks of outbound bagged cement per day. Due to this high volume, tracking and knowing the location of the vehicles at any stage of the loading process was extremely difficult. This project has given the logistics team the functionality to monitor real-time in-plant movement of vehicles and improve the overall safety inside the plant.
DG: This project has been aptly named SPEED, keeping in mind: safety of the stakeholders, productivity of the packers,
Another major advantage in terms of logistics management has been the visibility of the trucks. Now, with the help of RFID
After
based tracking, it has become possible for us to filter the seasonal and occasional trucks coming to our plant for loading during lean seasons and instead focus on the dedicated and regular fleet. This has also significantly reduced the pressure on the parking yard infrastructure which can now be better utilized by the dedicated fleet. CW: How will this help ACC serve its customers better? DG: ACC treats each of its stakeholders as a very important business partner. The implementation of the ACC SPEED project has given us several benefits and created a win-win situation for both. We have been able to reduce the overall in-plant detention of the vehicles. This in turn has contributed in the faster execution of orders for our customers and channel partners.
SPEED-LED displaying Packing bay number, tare weight details for Drivers
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Dealers/customers can now be kept informed, with a high degree of accuracy, as to when the truck carrying their order is likely to leave the plant, the estimated transit time and a forecast of when the consignment is expected to reach destination. Earlier we were not able to project this kind of valuable information with great accuracy. Now our customers can plan their work much better with this valuable input that we are able to provide.
CW: Does the project create a competitive advantage for ACC? DG: Yes. This project with its transparent and visible dispatch process is also coupled with other improvements we have implemented, such as enhanced basic amenities for the trucks’ crew members like a new washroom complex, a large cafeteria with television, water coolers and covered cooking area in a now much cleaner parking yard. Thanks to all these improvements, our Tikaria plant has become the most attractive plant for loading in the area. More frequent trips now enjoyed by regular and dedicated trucks translates into higher earnings for them.
These benefits factored in as a freight advantage with transporters can help make our product more competitive in a highly price-sensitive market. CW: Is the company currently investing in any other logistics-related optimization processes? DG: This project has already been replicated across two more locations of ACC with three more in the pipeline. In order to further strengthen the good logistics practices, the company has already partnered with a leading GPS service provider. In the first phase, 1000 vehicles are planned to be fitted with GPS devices for real-time, SPEED-LED screen for the Supervisor displaying Delivery details
out-plant vehicle tracking. In addition, we are also in various stages of testing/ piloting a truck scheduler for automated truck/order assignment and a driver/vehicle management center for improving the safety of drivers/vehicles. CW: What are the biggest logistics challenges the Indian cement industry is and will be facing? The major challenges faced by the cement industry today are: ■■ Overall rising costs – particularly of fuel, which lead to rising transportation costs. ■■ Availability of roadworthy and safe to ply trucks. ■■ Shortage of competent drivers and lesser number opting for driving as a profession. ■■ Poor road and safety infrastructure in the country. All the above factors, particularly the availability of competent drivers, will pose the biggest challenge in road transportation as fewer people now seem interested to enter this profession as compared to alternate areas of employment.
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feature
New Cement Projects to Support India’s Infrastructure Plans Following the decade low GDP growth registered by India in FY 2012-2013, the government is now aggressively pursuing measures to regain the economy’s brisk growth from 2005 to 2010 (8.4 percent CAGR).
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inr50
trillion
infrastructure budget for 2012 – 2017
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India Cement Industry Overview The estimated 2012 GDP growth of only 4 percent was primarily attributed to the country’s widening account deficit, which consequently diverted foreign investments to more attractive economies in Asia. The government’s high expenditure contributed to the account deficit and further led to the slowdown in infrastructure growth.
In view of the allocated budget for infrastructure, cement demand is expected to grow significantly in the next five years. For FY 2013-2014 alone, cement demand growth is projected to reach 5 to 8 percent, while India’s total cement capacity is expected to reach about 480 MT per year to meet the infrastructure development projects of the government for the next five years.
To put India back on track, the government implemented aggressive reforms in fiscal policy that included substantial reductions in subsidies to fuel, fertilizer, and food. Along with fiscal reforms, the government’s 12th Five-Year Plan (20122017) includes a US$1 trillion infrastructure budget targeted to attract foreign investments and stimulate consumer spending.
While growth did slow down during FY 2010-2011, capacity and production are forecasted to accelerate in the next few years to meet demand. Current players in the industry are now positioning themselves to take advantage of the government’s infrastructure plans by increasing capacity and utilization.
10 JULY / AUGUST 2013
Under this scenario, cement manufacturers in India are now looking at the pros-
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pect of expanding capacity to get a piece of the government’s US$1 trillion infrastructure budget. Considering that the global economy has not been ideal for most cement majors in recent years, private equity funding has been the option for many who have plans of increasing capacity in India. HeidelbergCement India Completes Expansion of Clinker and Cement Plants In the first quarter of 2013, HeidelbergCement started commissioning of its clinker and cement grinding plants in Damoh district, Madhya Pradesh, and in Jhansi, Uttar Pradesh. Total capital expenditure for the project reached €216 million and it has increased the company’s annual cement production capacity from 3.1 million to 6 million tonnes.
INDIA ANNUAL GDP GROWTH 12
6
0
2003
2004
2005
2006'
2007
2008
2009
2010
2011
2012
2013
CAPACITY
2014
2015
2016
2017
PRODUCTION
YEAR
Annual Capacity (MT)
Growth (MT)
Growth (%)
YEAR
Production (MT)
Growth (MT)
Growth (%)
2006-07
177.83
6.93
4.06
2006-07
161.66
13.85
9.37
2007-08
209.40
31.57
17.75
2007-08
172.31
10.65
6.59
2008-09
230.61
21.21
10.13
2008-09
185.61
13.30
7.72
2009-10
276.77
46.16
20.02
2009-10
204.95
19.34
10.42
2010-11
296.48
19.71
7.12
2010-11
216.28
11.33
5.53
Source: Cement Manufacturers' Assoc., ACC Ltd, Ambuja Cement Note: 2011 capacity and production is estimated only.
The expansion involves the increase in annual clinker production in Narsingarh from 1.2 million to 3.1 million tonnes. It also includes an overland conveyor belt that is 20 kilometers long that transports limestone from the quarry to the facility. On the other hand, part of the project also includes the increase in annual cement grinding capacity of the Imlai plant from 1 to 2 million tonnes and of the Jhansi facility from 0.8 to 2.7 million tonnes. The company’s new capacities in Central India are part of the strategy to establish
a good position in the market at a time when India is in the process of massive infrastructure development. Following the expansion, there are rumors circulating that HeidelbergCement is in discussion with private equity firms to sell a minority stake of its Indian sector. There has been speculation that Bain Capital is conducting a due diligence to consider picking up over 10 percent of HeidelbergCement in India. Other interested firms are Sequoia and Carlyle. Despite the rumors going around, the company refuses to comment on the matter.
However, in the first half of 2013 the company rated India as a big disappointing with only flat volumes and no recovery expected in 2013. Prices also weighted negatively upon the company’s performance in India, declining by Rs 100 in the last half of year. Holcim to Increase ACC Capacity in India Switzerland-based Holcim is planning to improve its market position in India with the expansion of its ACC plant in Jamul, Chhattigarh. Production capacity is tar-
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feature with the Jharkhand state government for the building of an 800 TPD cement plant in Patratu. The MoU likewise provides for the allotment of the limestone mines at Benti Bagda located near the proposed plant. Total investment is estimated at $36.2 million, which will be partly funded by a term loan from a consortium of banks headed by State Bank of India (SBI). Other banks that are part of the consortium are United Bank of India, Central Bank of India, and State Bank of Hyderabad. BCL currently has cement facilities in Asansol, West Bengal with a production capacity of 1000 TPD.
TOP PRIVATE EQUITY DEALS IN CEMENT SECTOR BUYER
TARGET
Baring PE Asia
DEAL SIZE ($MM)
Lafarge India
260.0
KKR India Advisors
Dalmia Cement (Bharat)
165.0
Credit Suisse PE
Binani Cement
32.2
JP Morgan Partners
Binani Cement
27.4
International Fin Corp
Vicat Sagar Cement
15.0
ADM Capital, Brescon Corp. Advisors
Saurashtra Cement
8.2
Source: VCCEdge
geted to increase to 35 million tonnes per annum from its current 30 million tonnes with commissioning expected by May 2015. For this expansion, Holcim awarded the contract to build a new 9,000 TPD cement plant to the KHD Group for €69 million. KHD will utilize its COMFLEX technology for the grinding plant along with other core equipment for the clinker grinding and pyro processing.
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At present, Holcim operates its cement plants in India through ACC and Ambuja Cement with a combined capacity of 57 million tonnes per annum, representing about 16 percent of India’s total cement production capacity of 360 million tonnes per annum. Burnpur Cement to Set up Cement Plant in Patratu Burnpur Cement Ltd (BCL) has entered into a Memorandum of Understanding
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Jaiprakash to Build New Facilities in Satna Jaiprakash Associates is finalizing plans to set up a 1.5 million tonnes per annum clinker facility and a 2 million tonnes per annum cement plant in Satna, Madhya Pradesh. This $202 million greenfield cement project will include plans to build a 35 MW coal-fired captive power plant intended to supply the 30MW requirement of the plant. Currently, Jaiprakash Associates operates 12 plants in India with a total capacity of 37.3 million tons. There were earlier plans to sell its 4.8 MT cement plant in Guajarat to UltraTech Cement aimed at reducing the company’s debts. However, plans to sell any of its cement plans were shelved when the deal fell through and the company reported that it is now comfortable in its present cash position. Jindal Steel & Power Limited to Diversify into Cement in India In a bid to enter the surging cement sector in India, Jindal Steel & Power Limited (JSPL) announced plans to establish a 2 million tonnes per annum cement plant at Raigarh, Chhattisgarh. Cement production will implement a backward integration plan that will use slag from its blast furnace and fly ash from the company’s power plant.
With an estimated project cost of Rs 6,050 million, the plant will sit on a 200 acre land and is expected to be completed within 24 months from start of construction. UltraTech Cement to Build 5.5 MTPA Cement Plant in Tamil Nadu Considered one of the largest cement manufacturers in India, UltraTech Cement plans to increase its current production capacity of 53.9 MTPA with a new cement facility in Tamil Nadu. The new project will involve a cement plant
with 5.5 MTPA, a clinker facility of 4.5 MTPA, a 75MW captive power plant, and a 15MW waste heat recovery facility. The project is estimated to cost about $415 million with a total area of 263 hectares and a plant area of 86 hectares. It is part of the company’s target of improving its total production capacity to 63.45 MTPA by 2015. Lafarge is also expected to start producing clinker at its brand new 2.6 million tons greenfield project in Rajasthan in
the third quarter of 2013, with the commercial activity is expected to begin in the end of 2013 or the latest in the beginning of next year. Overcapacity fears and the unexpected cement consumption slowdown did not put a stop to India’s cement companies’ expansion spree. However, companies became more selective when embarking on new cement construction projects, focusing only on the ones that yield above average results.
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feature HIGHLIGHTS FROM
CemWeek'S 4th annual 2013 INDIA CEMENT SECTOR SENTIMENT SURVEY
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The 4th Annual India Cement Sector Business Sentiment Survey is nearly out and we at the India Construction & Building Materials Journal had the opportunity of an exclusive look at the survey’s results before their sharing with the wider audiences. We are glad to be able to present here some of the highlights and provide our readers with before-hand data regarding the views and expectations of cement industry professionals.
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feature POSITIVE OVERALL, BUT CRACKS BEGIN TO SHOW Optimism continues to be the name of the game for the Indian cement industry – a function of long-term trends as well as human nature. But on a closer look, the survey shows that the optimism only runs skin deep and that it has already been eroded by an increasing percentage of industry members who feel dissatisfied with the overall performance of the field last year. For instance, the percentage of those who believe the industry performed “well” dropped from 43 percent in 2012 to 26 percent in 2013, while the number of respondents who believe the industry performed poorly almost tripled from 8 percent last year to 22 percent in 2013. Regarding the future evolution of the industry, survey participants continue to be on the optimistic side and hope for a “somewhat better” or “much better” performance compared to the last 6 months. Confidence in career prospects looks nearly the same in this year’s survey of the industry, with the overall career-related sentiments on the positive side. A substantial part of respondents – 47 percent, believe they have a fairly good chance for a career boost during the next period. Some confidence erosion manifested in the percentage of those highly confident about their prospects, whose numbers dropped from 21 percent in 2013 to 13 percent this year. ENERGY PRICE UP IN TOP OF CONCERNS The first two major challenges for the industry to overcome in the next year are no surprises: industry overcapacity and profitability. These stay on the minds of 34 percent and 20 percent of respondents, respectively. Energy price stands third in the top of concerns for the next year, in spite of the global fuel price downtrend reported during the last period. India’s solid fuel
16 JULY / AUGUST 2013
Fig. 1 - 2013 Industry performance in the last six months 4%
8% Terrible
22%
Poorly 26%
OK Well Excellent
41%
Fig. 2 - 2012 Industry performance in the last six months
8%
12% Terrible
1%
Poorly OK
36% 43%
Well Excellent
supply-demand gap and dependence on imported coal will further deteriorate - by May 2013 imports year over year increased by 43 percent. Currently energy prices are strongly subsidized – an element which may change in the near future.
from 11 percent to 23 percent. This correlates with concerns about profitability mentioned earlier, and signals that in spite of declared optimism, more members of the industry are circumspect about its future evolution.
Expectations about improvements in profitability are moderate. The finding shows that the proportion of those who believe that the profitability will actually decrease more than doubled compared to last year,
Our data reveals that capital expense reductions are on an upward trend. Survey participants who foresee cuts in capital expense doubled from 8 to 16 percent from last year, while the number of those
CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
Fig. 3 2013 Main challenges to overcome in the next year 6%
6%
Other
10%
Shortage of skilled labor
5%
Securing fuels
4% 4%
Regulatory Raw materials availability
6%
Profitability
34%
20%
Plant efficiency Excess capacity
6%
Environment/emissions Energy Prices
Fig 4 2013 Improvements in profitability moderate
23% Decrease 45%
No change Improve
32%
Fig. 5 2013 Input costs expectations
21% Worsen
40%
expecting an increase in capital expenditures dropped from 57 to 36 percent. INPUT COSTS PRESSURE TO GROW STRONGER In terms of input costs, about 60 percent of survey participants believe these will be reduced or stay the same over the next year. This is an almost 15 percent drop compared to last year. On the other hand, the number of those who expect input costs to exert even more pressure on total costs increased from 25 to 40 percent. However, half of participants believe their company will hire “a bit more/a lot more” headcount in the next 12 months. This may indicate that the industry needs to identify in the near future ways to relieve the pressure of input costs on the total costs of doing business, ways which may include keeping the same headcount, or even reducing it. CONCLUSION The overall pulse of the industry continues to be on the positive side, but this year’s survey highlights an underground current of concern and dissatisfaction. Issues such as energy price, overcapacity, controlling costs and operational efficiency linger in the minds of both top and middle management. While as a whole the economy is expected to slow down even further, cement industry’s flag continues to fly high. But for how long? “We would like to thank for their continuous support in surveying the state of the industry to Loesche, Testing Bluhm & Feuerherdt and CemWeek Magazine, who showed a particular dedication to understanding the sentiment behind India’s growing cement sector.”
Stay the same Improve 40%
Temperatur/Feuchte Temperature/Moisture Bestell-Nr.
Beton-Stechthermometer
INDIA CEMENT & no. CONSTRUCTION MATERIALS MAGAZINE -20 bis +60°C Order
Concrete insertion thermometer -20 to +60°C
17 CemWeek2013CW Group BMWeek JULY / AUGUST CemWeek CW Group BMWeek CemWeek BMWeek CW Group
Coal W Coal W Coal W
CW Group CW Group CW Group
SOUTH-EAST ASIA FOCUS
CW Research & Analytics CemWeek BMWeek CemWeek BMWeek CemWeek BMWeek
SOUTH-EAST ASIA FOCUS India consolidates its trading position
After a rather disappointing start of 2013, when India’s cement exports were almost 30 percent below the level reached in the first two months of 2012, the country regained footing, with cement exports settling at par level between the two years for the period January – April. Thus, India exported around 0.65 million tons of cement in the first four months of the year with 63.4 percent of which being dispatched to Sri Lanka. Even though exports flattened out during the mentioned period, structural changes emerged. Sri Lanka requested 3 percent more cement from the Indian companies in the wake of 2013, while Nepal brought a 25.3 percent decline. This led the Indian companies to seek diversification in their exporting destinations, dispatching almost 0.13 million tons outside Sri Lanka and Nepal between January and April 2013, versus the 0.10 million tons supplied during the corresponding period of 2012. Trading fortunes are expected to shift again in 2014 as India’s main destination, Sri Lanka, is focusing on becoming an exporting hub for South Africa and Kenya. Among a series of Sri Lankan expansionary projects, a new cement grinding unit is set to be commissioned by next year in the Hambantota harbor, with a total investment of Rs 2 billion. The project represents a joint partnership between Ruhunu Lanka Cement and the Pakistani based DG Khan Cement Company. INDIA MONTHLY CEMENT EXPORTS STRUCTURE (TONS)
Others
80,000
Pakistan
Bangladesh
Jan-13
Feb-13 Mar-13 Apr-13
0
Feb-12 Mar-12 Apr-12 May-12 Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748 18 JULY / AUGUST 2013
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SOURCE: CW Group Analysis
40,000
SOUTH-EAST ASIA FOCUS
India requires less and less cement from its external partners. The country imported 0.15 million tons of cement between January and April 2013, registering a sharp decline of 45.8 percent over the corresponding months of 2012. INDIA MONTHLY CEMENT PRODUCTION AND CONSUMPTION (TONS)
Others
300,000
Nepal
Sri Lanka
0 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
SOURCE: CW Group Analysis
150,000
While Bangladesh managed to overcome the tough conditions and increased its exports to India by 11.2 percent, Pakistan faced a drastic decrease of 72 percent in its exports to India. May and June 2013 continued to reflect the difficult environment faced by India’s external suppliers. The steep fall of the Indian rupee generated a severe decline in Bangladesh’s exports, with some traders discontinuing cement shipments to the neighboring country. MI Cement Factory declared in the beginning of July that the company’s exports to India declined by 45 to 50 percent over the last two months. MI Cement managed to export to the Northeastern states of India only 5,600 tons of cement in June 2013, versus the 9,760 tons exported in May 2013. The export price of MI Cement also declined, by around 5 percent, due to the devaluation of the Indian rupee. Other Bangladeshi companies mention the same reasons for their stoppage in shipments, noting also the non-tariff barriers in the form of certification and bank guarantee, coupled with Bangladesh’s weak infrastructure for the aggravation of the situation. To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748 INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
19 CemWeek2013CW Group BMWeek JULY / AUGUST CemWeek CW Group BMWeek CemWeek BMWeek CW Group
Coal W Coal W Coal W
FOB EXPORT PRICE TO INDIA (USD/TON)
Bangladesh
100
Pakistan
SOURCE: CW Group Analysis
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Mar-11
Jan-11
Nov-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
40
Aug-09
70
Jun-09
FOB export prices to India expressed in USD started to decline from the end of 2012 and the beginning of 2013. Pakistan exported one ton of cement in the exchange of USD 69.6 in April 2013, declining from its recent December 2012 peak value of USD 76.6. Following the same pattern, Bangladesh exported a ton of cement for USD 82.7 in April 2013, 4.1 percent below the most recent peak value registered in January 2013 of USD 86.2 per ton. INDIA MONTHLY CEMENT PRODUCTION AND CONSUMPTION (TONS)
Cement Consumption
Cement Production
25,000,000
12,500,000
0
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13
SOURCE: CW Group Analysis
SOUTH-EAST ASIA FOCUS
CW Group CW Group CW Group
CW Research & Analytics CemWeek BMWeek CemWeek BMWeek CemWeek BMWeek
Considering India’s limited trade activities when compared to the magnitude of the country’s production, (below 1 percent of the country’s output is exported), cement consumption continues to follow closely the trend of cement production. India consumed almost 90 million tons in the first four months of 2013, with production settling at around 90.5 million tons. Going forward, both cement consumption and production are expected to trend above 2012’s values, even though the monsoon’s season will take its toll on the coming months’ output. To learn more, please contact the CW Research & Analytics team at sales@cwgrp.com or +1-702-430-1748 20 JULY / AUGUST 2013
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last year; YTD: year-to-date; YTD%: year-to-date vs previous year
132 Larchmont Ave, Suite 12 Larchmont, NY 10538, USA
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CEMENERGY MARKETS
CW Research & Analytics CemWeek BMWeek CemWeek BMWeek CemWeek BMWeek
CEMENT ENERGY MARKETS COAL MARKET UPDATE
Total global trade volume remains on a steady path 2013 second quarter coal volumes traded globally were up about 8 percent from the second quarter of 2012, mainly driven by an increase in coal exports from Indonesia. Year-to-date output from Indonesia soared 20 percent, while Australia was up 9 percent and Russia, South Africa and Colombia grew 7 percent versus last year. June 2013 coal output from South Africa’s Richards Bay Coal Terminal (RBCT) rose 22 percent to 5.3 million tons in June, following a 30 percent decline during May. In Australia, coal shipments out of Newcastle grew 10 percent, recovering from a 9 percent drop in May. Colombian coal exports recovered in the second quarter of 2013 after the steep decline in February and March that followed the coal union strike. However, on July 23 workers at Drummond, the nation’s second-biggest coal producer, went on strike to demand higher pay and protesting against planned layoffs. The government has intervened and all parties expect to reach a deal soon. COAL GLOBAL TRADING (MILLION TONS) 100
Rest
US
Colombia
South Africa
Russia
Australia
Indonesia
May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 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 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
0
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CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
SOURCE: CW Group Analysis
50
CEMENERGY MARKETS
India coal imports have been ramping up steadily for the last months following increased demand from power generators and steelmakers. Sources report increases of over 20 percent both in May and June over last year’s volumes, to offset local production shortfalls. In their last quarterly report, Coal India (CIL), the world's largest coal company and the main domestic supplier of coal in India, announced a 2 percent increase in shipments compared to the previous year, missing their target. Coal production for the same period was flat versus last year. In the United States, the Energy Information Administration (EIA) is expecting coal production to remain relatively stable this year compared to 2012, while coal exports are anticipated to decline to around 100 million tons in 2013. Exports will be mainly affected by increased competition due to low coal prices, the on-going economic slowdown in Europe and deceleration in some economies in Asia, China mainly. China’s coal imports have been declining this year, as a result of weakening demand in the country. Also, the local industry has seen its sale prices plunge, making imports less attractive to coal buyers and favoring domestic products. Meanwhile, the government is still considering a ban on imported coal with low calorific value, but the proposal has found strong opposition and it is unknown whether the authorities will move on with the project or not. The ban would have a negative effect on Indonesia, the main supplier of low calorific coal to China. As a response, the Indonesian government has announced the country will be looking for new export markets to divert the volume lost to China.
energy prices update Coal Coal trading prices in the main export hubs slid again in June as worldwide supply continues to outpace demand. The biggest drops were registered in South Africa and Australia, where prices fell 6 percent from previous month and 9 percent and 5 percent, respectively, from a year ago. Coal price in South Africa reached US$77 per ton in June, the lowest level observed since January 2009. COAL GLOBAL TRADING (MILLION TONS) South agrica Richards Bay
Colombia exported
Australia Newcastle
Indonesian HBA
US exported
150
SOURCE: CW Group Analysis
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
60
Jun-09
105
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Group CemWeek2013CW 23 BMWeek JULY / AUGUST CemWeek CW Group BMWeek CemWeek BMWeek CW Group
Coal W Coal W Coal W
CW Group CW Group CW Group
CEMENERGY MARKETS
CW Research & Analytics CemWeek BMWeek CemWeek BMWeek CemWeek BMWeek
The average Harga Batubara Acuan (HBA) coal price in Indonesia remained unchanged from May, while coal price in Colombia at the end on June fell 2 percent versus the previous month. Year-over-year prices are now down 18 percent in Indonesia, 17 percent in South Africa, 12 percent in Colombia, 14 percent in Australia and 5 percent in the U.S. In China, coal prices continue to fall off. The Bohai-rim Steam Coal Price Index (BSPI), which covers six major coal shipping ports in China, is now 9 percent below the level it had at end of 2012.
Petcoke The 12-month average price of U.S. uncalcined petcoke for export markets remained unchanged in June at US$80 per ton. Average annual prices seem to have stabilized after a long slide that started in the fourth quarter of 2011. The rate of decline has eased in some markets, especially in India, where the price is now at the same level it was a year ago. While prices are bogged down, trading volumes are on the rise. U.S. petcoke exports soared in May and reached the second-highest petcoke volume exported in U.S. history, boosted by an increase in shipments to China and India U.S. U.S. year-to-date petcoke deliveries to some west European markets remain weak, whereas exports to Asia and Central/South America have surged. The countries with the highest drop in volume are Ireland (down 84 percent), United Kingdom (down 67 percent), Spain (down 48 percent) and Portugal (down 60 percent). US PETCOKE EXPORT PRICE (US$/TON) ROLLING 12-MONTH AVERAGE
120
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CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
SOURCE: CW Group Analysis
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
0
May-11
60
CEMENERGY MARKETS
Natural Gas With oil prices declining from a 12-month high in February 2013 and a soft demand environment, natural gas prices in Europe and liquefied natural gas (LNG) prices in Japan remained unchanged in June compared to the previous month. LNG price in Japan reached its lowest price in May since November 2012 but it is expected to recover as the summer season hits and power consumption goes up. In Europe, price remains at high level, and the average price for the first 6 months of 2013 is 6 percent higher than the same period of 2012. Natural gas demand in Europe is still sluggish but Russia’s Gazprom, the largest gas supplier to European markets, is expecting a 9 percent growth in its deliveries to the region during 2013, following a decline of 7 percent in 2012. Gazprom reported an increase of 5 percent in its export contract pricing during 2012. In the U.S., Henry Hub spot price declined to US$3.8 per mmBtu in June, after reaching levels over US$4 per mmBtu in April and May. Prices are down in most regions except for the Northeast where it rose 10 to 20 percent during the second week of June due to warmer-than-normal temperatures. The heat wave continued to affect west and southwest states through the end of June and the beginning of July, with temperatures hitting triple digits in most locations. Experts are predicting 2013 summer will be among the top 10 warmest on record, which could send natural gas prices back to the US$4 per mmBtu. However, the U.S. Energy Information Administration (EIA) still maintains its 2013 natural gas price forecast for 2013 at around US$3.92 per mmBtu. NATURAL GAS PRICES (US$/MMBtu)
20
Japan LNG
Europe
US
Jul-13
Nov-12
Mar-12
Jul-11
Nov-10
Mar-10
Jul-09
Nov-08
Mar-08
Jul-07
Nov-06
Mar-06
Jul-05
Nov-04
Mar-04
Jul-03
Nov-02
Mar-02
Jul-01
Nov-00
Mar-00
Jul-99
Nov-98
Mar-98
Jul-97
0
SOURCE: CW Group Analysis
10
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Group CemWeek2013CW 25 BMWeek JULY / AUGUST CemWeek CW Group BMWeek CemWeek BMWeek CW Group
Coal W Coal W Coal W
Cement Consumption (million tons) Type
LM
MoM (%)
YTD
YTD (%)
Type
LM
MoM (%)
India (April)
22.3
-7%
12%
90.0
9%
Imports (April)
0.04
16%
Pakistan (June)
2.2
5%
-3%
13.3
2%
Exports (April)
0.20
6%
India Cement Importing Sources excl. clinker (million tons - April) Type
LM
MoM (%)
CW Group CW Group CW Group
India Cement Trade - excl. clinker (million tons)
YoY (%)
YoY (%)
YTD
YTD (%)
-39%
0.2
-46%
41%
0.7
-0.3%
India Cement Exporting Destinations excl. clinker (million tons - April)
YoY (%)
YTD
YTD (%)
Type
LM
YoY (%)
MoM (%)
YTD
YTD (%)
Bangladesh
0.03
42%
94%
0.1
11%
Sri Lanka
0.13
28%
77%
0.4
3%
Pakistan
0.01
-22%
-76%
0.1
-72%
Nepal
0.03
-24%
-22%
0.1
-25%
Cement Retail Prices per 50 kg bag (May) Type
LM
MoM (%)
YoY (%)
Cement Retail Prices per 50 kg bag (May) YTD
YTD (%)
Country
LM
YoY (%)
MoM (%)
YTD
YTD (%)
India (INR)
293.0
5%
0%
289.0
-1%
US
2.9
0%
24%
12.6
5%
Pakistan (PKR)
463.1
1%
5%
458.8
6%
India
0.3
62%
85%
1.0
23%
Coal - Exports (million tons) Country
LM
MoM (%)
Indonesia
32.0
-9%
Australia
15.5
US
9.7
Colombia
8.0
South Africa
Petcoke - Global export prices (USD/ton - May)
5.9
YoY (%)
YTD
YTD (%)
LM
YoY (%)
MoM (%)
YTD
YTD (%)
195.7
19%
US
76.5
-3%
-10%
79.1
-1%
10%
11%
85.9
11%
India
86.3
-14%
-8%
101.5
23%
2%
-17%
56.9
-5%
-1%
2%
34.5
-16%
22%
-1%
36.8
0%
COAL EXPORTS MoM (%) South Africa
Country
22%
Colombia
US
Australia
Indonesia
200%
Natural Gas Prices (US$/mmBtu)t Country
LM
MoM (%)
Japan
16.5
Europe
12.1
US
3.6
YoY (%)
3%
YTD
YTD (%)
-9%
16.2
-4%
1%
9%
12.1
6%
-5%
24%
3.7
53%
US petcoke exports to India prices MoM (%)
60%
May-13
Apr-13
Feb-13
Mar-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
-100%
Jun-12
-40%
May-12
0%
0%
Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
Coal export prices MoM (%)
10
South Africa
Colombia
US
Australia
Indonesia
Coal - Global export prices (USD/ton)
Australia
88.7
-6%
-5%
95.9
-14%
US
80.4
-5%
-2%
81.6
-5%
Colombia
80.4
-2%
-11%
85.2
-12%
South Africa
77.3
-6%
-9%
82.5
-17%
0 -10 Jun-13
-18%
May-13
87.5
Apr-13
-12%
Mar-13
-1%
Feb-13
84.9
Jan-13
Indonesia
Dec-12
YTD (%)
Nov-12
YTD
Oct-12
YoY (%)
Sep-12
MoM (%)
Aug-12
LM
Jul-12
Country
Jun-12
CEMENERGY MARKETS
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event EVENT Cement Business & industry (CBi) AfriCA 2013 ConferenCe GMI Global brought their custom-tailored CBI Africa 2013 Conference to Johannesburg, South Africa on March 27-28, 2013 – the first of its kind in this region. There were over 100 delegates registered, an exceptional selection of speakers who are leaders in their fields, and top corporate sponsors from the most influential cement business and manufacturing companies.
24
www.cemweek.com
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Coal Week Coal Week Coal Week INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
27 CemWeek2013CW Group BMWeek JULY / AUGUST CemWeek CW Group BMWeek CemWeek BMWeek CW Group
Coal W Coal W Coal W
cement
market and competition
M
arket and competition
he Indian cement sector has closed the second quarter on an optimistic tone, with stocks of major players going up and dividends granted to shareholders. The celebration did not last for long however, as the integration between Ambuja and ACC as part of Holcim’s realignment of its Indian operations has come to take its toll. In other news, the sector looks ahead to second half of 2014 for more vigorous growth.
Together, ACC, Ambuja and UltraTech Cement control a third of India’s cement market annual capacity of 350 million tons. Shares of these top cement makers have shown a surprising upward movement just before Holcim’s announcement, even though we’re in the middle of the monsoon season and usually it is a time of low construction output. Ambuja Cements has gained 10 percent to close at INR 205.50, ACC has gained 4.3 percent during the same period, while UltraTech Cement shares were up 3.6 percent.
SECTOR FINANCIAL NEWS AND EXPECTED EVOLUTION Shares of Ambuja Cements plunged by 10.52 percent in trading on Thursday, July 25, on the Bombay Stock Exchange, closing at Rs 171, following the news that Holcim went through with its decision to realign its Indian operations and that Ambuja is to acquire a 50.3 percent stake in ACC through cash and allocations of
28 JULY / AUGUST 2013
shares. In the same context, ACC shares also dropped 3 percent to Rs 1.194, down by Rs 39.9. Otherwise, Indian cement shares faced a relatively muted near-term outlook, after falling ahead of first quarter 2013 results. The weak financial environment is blamed on low demand, lower than expected volumes, and poor margin achievement.
CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
This good performance has allowed the three to grant dividends, but this is unlikely to boost the sector in the medium run, especially in light of industry reports which are expected to confirm the first quarter as the third consecutive weak quarter, in terms of both volume and prices. Looking ahead to the first quarter of FY 2013 - 2014, estimated industry volumes are expected to be up 4 percent yearover-year, but down 8 percent quarterover-quarter to 61.7 million tons, while
PRODUCTS AND SALES In terms of new products, ACC, via a small subsidiary Encore, in the Visakhapatnam special economic zone, has launched its corrosion-proof Coastal Plus product, looking to corner the market in northcoastal Andhra Pradesh. Coastal Plus is produced at Encore, at a rate of 0.03 million tons per month, from Visakhapatnam Steel Plant slag mixed with Portland cement. In addition, ACC is modernizing plants in Jamul, West Bengal, and Jharkhand, intending to double its eastern region production capacity to approximately 10 million tons. In total, ACC has 17 cement plants and more than 50 readymix concrete plants, as well as 21 sales offices and several zonal offices manned by a workforce of 9,000, and over 50,000 retail outlets across India. ENVIRONMENTAL NEWS In India, the cement industry reports several developments on the environmental front. Efforts to decrease carbon dioxide
CEMENT: MARKET AND COMPETITION
the average all-India cement realizations for the first quarter of FY 2013 - 2014 will likely be down 4 percent year-over-year and broadly flat quarter-over-quarter. Average estimated EBITDA is expected to decline by 27 percent year-on-year and to remain broadly flat quarter-on-quarter. Furthermore, the earnings downgrade cycle is expected to continue in the first quarter of 2014. The estimated EBITDA for the 2014- 2015 financial year is down by 9 to 10 percent for ACC and ACEM, and by 3 to 5 percent for UltraTech, Shree Cement, Madras Cement, and JK Lakshmi Cement. Positive outlook for the sector hinges on the demand recovery expected to happen in the second half of next year, led by a pick-up in housing after a normal monsoon season, reversal in the interest rate cycle and by a gradual acceleration of governmental infrastructure spending in light of various state and general elections, besides the low-base effect. The current seasonal weakness and prospective recovery indicate that UltraTech Cement, Shree Cements, and Madras Cement are currently recommended stock purchases.
emissions are spurring interest in alternative fuels and raw materials (AFR) in the industry. Thermal substitution with industrial and municipal waste of up to just five percent of the required inputs is expected to reduce the country’s carbon dioxide emissions by about 1.5 million tons annually. These changes would help cement plants to meet or exceed targets established under the Perform, Achieve, and Trade (PAT) scheme, focused on reducing fossil fuel consumption by Indian industry. Additional impetus comes from the Shakti Foundation, which has launched a project to unite stakeholders and promote the use of alternative fuels and raw materials in the cement industry. Also, cement producer ACC has announced plans to reduce its fossil fuel consumption by 5 percent by 2015 to help lower carbon emissions. The major fossil fuel employed in cement manufacturing is coal, which provides the heat needed to make clinkers and can cost a third of total manufacturing expense. ACC’s goal is to use cleaner fuel with lower carbon emission and low
ash content, enabling good quality clinker to be produced from a blend of more slag and fly ash. In related news, the Zuari Cement’s grinding unit in Chennai, India, has won two environmental quality achievement certifications, remarkably soon after its 2011 commissioning. In January, Zuari was awarded the ISO 9001:2008 quality management system certification by NQA, a leading assessment, verification, and certification body, working to help improve performance in quality, environment, health and safety management. The certification came after last April Zuari became the first unit in its area to be certified in compliance with the environment management system ISO 14001:2004. On the same note, the company has installed a new solar power project at Yerraguntla, in the YSR District of Andra Pradesh, aiming to boost its energy sustainability. The plant will produce 850 MWh of energy per year and will be included in the mix used to power plant operations.
INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
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Coal W Coal W Coal W
cement
m&a and finance
m
&a and finance
5
1
ndian cement companies are facing weak market conditions and seeking opportunities to stabilize their operations. But in the meantime, cement majors take the stage in announcing reshuffling moves. Most notably Holcim, who decided to align his Indian operations under a new corporate structure in a move which is expected to consolidate its efficiency by the use of common synergies. in India, Ambuja and ACC are expected to start joined operations soon, the first stage being the supply of each other with resources, especially clinker. As such, two ACC plants should be seen supplying clinker to two Ambuja units and two Ambuja plants would supply four ACC units. Similarly, 13 Ambuja plants would supply cement to parts of 21 states for ACC, while 10 ACC plants would supply to parts of 16 states for Ambuja.
HOLCIM RESHUFFLES INDIAN OPS Credit Suisse has downgraded Ambuja Cements stock to "neutral" from "outperform," resulting in a drop in the company’s share prices by 4 percent just before Holcim moved in to announce the consolidation of Ambuja and ACC under a single corporate structure. According to the arrangement, Ambuja Cements is to acquire 24 percent in Holcim India - a wholly-owned financial holding company of Holcim - followed by a stock merger between the two. At present, Holcim India directly holds 9.76 percent stake in Ambuja and 50.01 percent in ACC. After the merger, Holcim India's stake in Ambuja will stand cancelled and Ambuja will own 50.01 percent stake in ACC. With this, Holcim's stake in Ambuja Cements will rise from 50.55 percent to 61.39 percent. Ambuja, in turn, is to buy Holcim's stake in ACC. At the end of the operation, ACC will become a subsidiary of Ambuja Cements. Currently, Holcim is taking steps to organize a new joint management panel for the two companies, whose primary
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mission is to identify synergies and implement best practices for a smooth integration between the two. A new common corporate structure is also in place to provide joined services such as Finance and HR, but also to overview other strategic areas, such as supply chain optimization. Merging these services areas is expected to lead to benefits valued at Rs 900 crore. As part of the deal through which Ambuja becomes the flagship of Holcim operations
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SHRIRAM AND CRH CONSOLIDATE ACTIVITIES Several other companies have announced plans to sell off part or all of their Indian holdings. Shriram Cement is discussing with potential investors to sell its cement unit, valued at about USD 250 million. Shiram’s shares gained 10.94 percent on the news, to settle at INR 46.15. Also CRH Pic, which holds a 50-percent stake in MyHome, has indicated that it may buy the unit under its Indian Joint Venture with Myhome Industries. The purchase would give CRH controlling shares in Sree Jayojothi Cements, which is a part of Shriram Ventures, the holding entity of Shriram’s non-financial services
businesses. In the sale, CRH is pitted against Vicat, which is also negotiating to make the Shriram purchase. Private equity major Blackstone had previously expressed interest, but abandoned its purchase efforts last month. PARIS CEMENT TAKES OVER STAKE IN LAFARGE INDIA The Competition Commission of India (CCI) has approved the proposed sale to Paris Cement Investmen Holdings of a 14.03-percent stake in Lafarge India. Lafarge India is a subsidiary of the French cement major Lafarge. Paris Cement Investment Holdings is a subsidiary of Baring Private Equity Asia. With the decision, the CCI confirms that the deal will not harm competition in the Indian cement industry. Furthermore, CCI points out that there is no vertical business relationship between Lafarge India and Paris Cement Investment Holdings, Baring, or any other Baring portfolio companies.
LOCAL SHARES POST MIXED PERFORMANCE UltraTech’s stock declined 4.15 percent in the second quarter of 2013, a notable underperformance when compared with the Sensex’s decline of 0.28 percent in the same period. Month-over-month, UltraTech fell 8.3 percent in June 2013, while the Sensex dropped 5.46 percent in the same period.
demand revived in early 2012, Madras’s cement plant in Alathiyur came online, boosting the company’s capacity by 20 percent to 12.5 million tons per year by the start of 2013.
CEMENT: m&a and finance
GUJARAT CEMENT SALE DELAYED By contrast, Jaiprakash Associates (JP) has delayed the sale of its 4.8-metric ton Gujarat cement plant. Reports that the sale was postponed because weak demand affected the plant’s valuation have been disputed by the company’s executive chairman. In efforts to deleverage its stretched balance sheet, JP has consolidated debt of over Rs 50,000 crore and expects to sell the Gujarat plant for Rs 4,000 crore. Other measures in the same direction include plans to sell land parcels of the company subsidiary Jaypee Infratech. The Gujarat sale delay has resulted in falling share prices for the company, although JP Associates insists that the sale will go ahead before the end of the year.
CCI FINES IMPOSED FOR CARTELIZATION The India Competition Commission has levied penalties against eleven cement companies, which will be required to provision Rs 669 crore in the June quarter out of a total Rs 6,698-crore fine. The fine resulted from a cement price cartelization case, and the Indian Supreme Court has agreed with the Competition Appellate Tribunal that the companies should abide by the penalty. The penalty will seriously impact the companies, which are already dealing with a June quarter characterized by slow demand, decreased cement prices, and increased diesel prices resulting in elevated production costs.
Madras Cement, on the other hand, was a stand-out, growing at a respectable 10.5 percent and a net profit increase of 4.8 percent, compared with country-wide volume growth of 5.6 percent. However, only 70 percent capacity utilization is expected in the southern portion of India over the next year and a half. This will create a supply glut and generate strong price volatility, resulting in variable Madras growth. The root of the strong growth was the rapid development in the eastern markets, where Madras’s product volumes expanded by 78 percent to 0.94 million tons. India-wide, Madras’s net profit reached Rs 403 crore, while net sales grew by 18 percent to Rs 3,788 crore. As was typical of southern Indian cement companies, Madras exhibited weak financial performance in FY11 and FY12, a consequence of weak demand. After
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variety of companies are planning expansion projects in India, suggesting a high degree of confidence in future sector growth. Heidelberg aims for double production capacity, UltraTech has undertaken a full scale expansion campaign and Madras kicked off the final stage in a two year long company-wide upgrade operation. All this while Rajahstan boasts two digit growth in year-over-year demand increase for cement products.
SETTING THE PACE FOR FUTURE GROWTH Via a combination of mergers and acquisitions, Heidelberg Cement India is looking to double its manufacturing capacity, to approximately 15 million tons, by 2017. Recent expansion by the company has occurred in the central Indian regions of Uttar Pradesh (Jhansi) and Madhya Pradesh. Similarly, India’s Birla Corporation is planning to invest about Rs 2,500 crore over the next three years to increase its cement capacity from 9.3 million tons to 13.8 million tons, a move that will generate approximately Rs 1,600 crore in new revenue. Additional new projects for the company include a 1.5 million-ton plant at Chanderia in Rajasthan and a 1 million-ton plant in Assam. ULTRATECH ON INVESTMENT SPREE To improve its Indian market share, UltraTech Cement will expand its grey cement capacity by 23 percent, from 48.75 million tons to 61.45 million tons per year by FY15. Total capital expenditures for the project are anticipated at Rs 115 billion.
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Recently, the firm commissioned a 3.3 million tons clinker production facility at Rawan, Chhattisgarh, a new cement grinding unit at Hotgi, Maharashtra with a capacity of 1.55 million tons per year, and a 0.6 million ton per year upgrade of the grinding unit at Gujarat Cement Works. In addition, UltraTech is planning a Rs 2,500 crore, 86 hectares green-field cement plant on a 263 hectares construction site of in Tamil Nadu, and has conducted a public hearing for the project. An environmental impact assessment is underway. The
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plant will include two production lines of 2.25 million tons apiece, with 4.5 million tons clinker production, a 75 megawatt captive power plant, and a waste heat recovery facility of about 15 megawatts. Other planned UltraTech projects include installation of waste heat recovery systems, thermal power plants, packaging terminals, RMC plants, and other normal capital expenditures across all locations the company operates in. The company currently holds 18 percent of the Indian market share and is the largest single
CEMENT: projects and expansions
cement player in the country. As of the end of FY13, the company’s total clinker capacity is 39.5 million tons per year. MADRAS TAPS INTO WIND POWER Meanwhile, Madras Cements expects to open a cement-grinding unit in Andhra Pradesh in 2014-2015, boosting its expenditures to Rs 350 crore over the next two years. The new unit will use the local area’s fly-ash as well as clinker from the Madras Jayanthipuram plant, to produce cement. The output from the plant will be marketed primarily in coastal Andhra Pradesh, Odisha, and Chattisgarh. The plant represents the final major capital expenditure scheduled for Madras Cements after a growth period covering the past two years, which included the construction of a grinding unit in Tamil Nadu, as well as Rs 55 crore investments in expanding plant productivity across Madras holdings. In addition, the company has developed wind and thermal power generating assets to meet almost all of its electricity requirements. In all, Madras has spent Rs 1,000 crore to raise its capacity by 3.7 million tons to 13.6 million tons. Increased power supply and reduced prices of pet coke, which forms 75% of the production fuel mix, are expected to combine to further boost operating profit growth by 9 percent from 2013 to 2015. Several other Indian firms are planning expansions in the near future, as well. Shiva Cement plans to invest Rs 270 crore to increase its production capacity to one million tons from 0.13 million tons per year currently. A consortium of banks is to provide a term loan for the project, on top of a promoter investment of Rs 30 crore. Project completion is expected in the first half of 2015. Orient Cement, the cement unit of Orient Paper & Industries, has received environmental clearance to place a 3 million tons cement plant at Chittapur in Gulbarga, Karnataka. The project will cost Rs 1.75 crore, with completion expected in December 2015, and will elevate the company’s production capacity to 8 million tons per year.
FOCUS ON RAJAHSTAN In region-by-region analysis, India’s Rajasthan accounts for 6 percent of total cement consumption in the country. With its significant limestone belt, the area accounts for 45 to 50 million tons of installed cement capacity, equivalent to 15 percent of total capacity for the country, with production utilization of 80 percent last year. Additional capacity is expected to go into production in FY14 – 16, up to a total of 18 million tons. Rajahstan consumes in total between 1 and 1.3 million tons of cement monthly, with demand increasing 15 percent year-overyear in the first half of 2013 and with a total of 500 to 600 cement dealers in the region. Prominent brands in the state are Ambuja Cements, UltraTech, Binani, JK Lakshmi, Shree Cement, JK Cement and Wonder Cement. Approximately 90 percent of sales of Ambuja Cements are made via
the company’s retail trade network, while approximately 60 percent of Shree Cement’s sales are local. Other brands sell 60-70 percent in trade. Ambuja cement registers the highest prices in the state, followed by UltraTech at Rs 2 per bag, below those of Ambuja. Other brands sell at Rs 5 per bag below Ambuja. Currently, Rajasthan is experiencing weak demand resulting from a strong monsoon season, but the next harvest is likely to propel demand forward once more, particularly in tier -2 and tier -3 towns and villages. Across the full Indian territory, cement production capacity rose an average of 10.4 percent between 2009 and 2013, increasing from 219 million to 325 million tons. The resulting surplus is likely to lead to production slow-down, with new capacity expected to reach only about 66 million tons between 2014 and 2016.
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rices across India were up by an average of Rs 30 per bag, perhaps in a traditional move by producers ahead of monsoon to give the price space for variation during the normally uneventful season. Price forecast for the near future continues to remain flat while long term outlook stays neutral and positively biased.
DEMAND FELL ACROSS ALL REGIONS Cement prices in India have registered a recent upward trend, and indications suggest that demand may pick up in the latter quarters of 2013. Prices rose an average of Rs 30 per bag, the highest regional increase, in the southern portion of the country. For the country as a whole, average June 2013 cement prices reached Rs 308 per bag, an increase from Rs 294 per bag registered in May 2013. In the eastern and western regions, prices increased by Rs 15-20 per bag, elevating the average prices in the east to Rs 333 per bag and in the west to Rs 306 per bag for June 2013. Price increases were considerably lower, in the range of Rs 5-10 per bag, in the northern and central regions of the country. Northern region prices reached an average of Rs 296 per bag in June, while central region prices reached Rs 293 per bag, on average. Across all regions, demand fell drastically, as a result of an early monsoon arrival accompanied by a general slowdown in the infrastructure sector. PRICE FORECAST REMAINS FLAT On a year-over-year basis, prices of cement in India are up by Rs 15 per bag. 34 JULY / AUGUST 2013
private sector spending as a result of an expected softening of the interest rate cycle.
According to dealers, cement prices are likely to remain flat in the near future. This is an important factor in cost controls, since construction volumes are registering continuous decline as a result of the arrival of the annual Indian monsoon. Market expectations are that demand for cement will remain tepid in the first half of FY14, but the industry outlook for the longer term remains neutral with a positive bias. This is largely due to a demand supply scenario likely to improve as a result of increased infrastructure spending by the government, exceeding last year’s expenditures, coupled with a revival in
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DEALERS PROTEST ARTIFICIALLY CREATED SHORTAGE Recent price hikes are sparking resentment in the six coastal districts of Srikakulam, Vizianagaram, Visakhapatnam, East Godavari, West Godavari, and Prakasam, where cement dealers argue that cement companies have been boosting prices unfairly over the past two months. Prices of cement in the region have risen by more than Rs 100-125 per bag since May 1. Cement dealers argue that cement companies have created artificial shortages, by cutting production, in an effort to justify the price hikes. Additionally, cement dealers complain that the situation causes considerable difficulties for their businesses. As existing construction commitments cannot be met at the contracted rates, the price hikes drive projects’ costs well beyond budget. The steep price increases in Andhra Pradesh have not been accompanied by proportionate hikes in production costs, prompting dealers to argue that price increases are unjustified.
CEMENT: EQUIPMENT HIGHLIGHTS
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quipment highlights sche LM 4600CS2 vertical roller mill to grind granulated blast furnace slag. Hebei Jintaicheng, a building materials processing private enterprise, was founded on April 10, 2009, in Baita County, Shahe City. With its new mill in place, now the company plans to produce and sell an annual output of 0.5 million tons per year of ground granulated blast furnace slag. Production is expected to proceed at 90 tons per hour, with 4,500 Blaine, while the mill drive will have a capacity of 3,150 kilowatts. The mill components have been delivered and are currently under installation.
LOESCHE-Merzin-TR-LM46.2+2CS-4, recently ordered by China’s Hebei Jintaicheng Building Materials Shareholding Co., Ltd.
Loesche bags equipment orders in India and China HeidelbergCement’s Indian arm has commissioned a split Loesche grinding plant at Jhansi, Uttar Pradesh. Using clinker from the Narsingarh unit in Madhya Pradesh, the plant boosts Indian cement capacity of the company to 6 million tons per year. Guaranteed at 215 tons per hour, the LM 53.3+3 C Loesche mill exceeded expectations and exhibited production of 235 tons per hour in March 2013 performance tests. Meanwhile, in December 2011, China’s Hebei Jintaicheng Building Materials Shareholding Co., Ltd., ordered a Loe-
SAMSON brings new maneuverability to Stormajor SAMSON Materials Handling is offering a new evolution of its wheeled Stormajor®: BF40415T. Launched in 2013, the new product is a tracked derivative of the Stormajor® principle, intended to of-
fer new maneuverability along with the brand’s existing performance and reliability. The BF40415T assists with stockpiling, barge loading, ship loading, and rail wagon loading, and is able to handle load densities of up to 1.6 tons per cubic meter, with a load capacity of up to 625 cubic meters per hour. Other features of the BF0415T include remote control umbilical or optional radio control, as well as a folding 15-meter compact design intended to allow the machine to be operational within minutes of deployment at a site. An interchangeable 20-meter boom is also available. The maximum stockpile value for the machine is 3,130 cubic meters. Furthermore, the BF0415T has a wide radial range, allowing stockpiling at +/- 65 degrees. The machine is compatible with ADTs up to 30 tons in capacity, roadtipping trucks hauling 30-ton trailers, and wheel loaders with bucket capacity of up to 8 cubic meters.
Stormajor® Boom Feeder BF0415T, track-mounted (©SAMSON)
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he National Social Security Fund (NSSF) of India has raised its stake in the firm Bamburi Cement above the 15 percent threshold that will ensure the right of appointing a director to the company’s board NSSF is currently poised to reclaim the Bamburi Board seat it lost in 2011. This while Binan Cement launches innovative advertising campaign based on love for ancestral homes.
prominent brand ambassadors among which Amitabh Bachchan. The campaign is centered around the concept of the ancestral home, a concept with a special significance in Indian culture. Ancestral homes are filled with memories of earlier family members. The insight on which the campaign is based suggests that keeping ancestral homes in good shape through renovation works is a proof of love towards the parents and grand-parents who built them, and contributes to keeping alive the memory of close relatives from generations past.
NSSF raises Stake in Bamburi Upon increasing its stake, the NSSF sent the name of an undisclosed nominee for the Board position to Bamburi. The 15 percent requirement for Board representation had inhibited the ability of the NSSF to place its representative on the Bamburi Board at the company’s annual general meeting last year. The NSSF’s previous Bamburi Board representative, Alex Kazongo, was dropped from the Board in March 2011 after he failed to attend successive meetings. Kazongo is a former NSSF managing trustee.Several Indian companies have received the GreenCo rating, designating firms that have made their daily operations sustainable beyond the sole use of sustainable buildings. The awards, were announced at the GreenCo Summit 2013. The companies receiving the GreenCo rating include the Bengaluru International Airport Limited (BIAL), ITC Limited PSPD Division - Badrachalam, Vasavadatta Cement - Sedam Unit, ACC Ltd - Thondebhavi Cement Works, Brakes India Ltd - Foundry Division - Sholinghur, JK Tyres & Industries Ltd, Kankroli, 36 JULY / AUGUST 2013
HIL – Golan, Thyssenkrupp Electrical Steel India Pvt Ltd, Nasik, and Hindustan Unilever Ltd, Mysore. Binani Cement new advertising campaign In other news, cement major Binani Cement has launched an advertising campaign titled ‘Parental love’, which features
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The Binani Cement campaign is a first on the local market, as according to some specialists it shifts and elevates the focus of cement-related advertisement from the material qualities of the product, such as durability and ease of use, to a higher plane, where it allows people to connect with the product in an emotional way. Although the new campaign was well received by the public, there were voices in the Indian advertising industry that said that the personalities featured in the TV commercials are too strong and that they overshadow the product.
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regional news
Axle load limits for truck transportation imposed by Pakistani authorities are severely c Multiple regional expansionary actions are announced by cement companies operating
pakisTan’s CemenT sales affeCTed by loGisTiCs limiTaTions Pakistani cement companies dispatched 2.888 million tons of cement in May 2013, more than 7.5 percent below April 2013. Apart from the slower pace of construction activities, the decline was also perceived as the direct consequence of strict application of the axle load limits imposed by the national highway and motorway authorities. The axle load rule had been lax for years, allowing trucks to be loaded domestic market with 0.39 million tons of cement, theirless exports nearing extra quantities. TheWhile stricterSri applindia’s surrounding regions sign inwith with mixed news. Lanka setswith up no than three0.22 million tons. cation impacts not only the availability of new cement production units and plans for ban on foreign investment, Nepal waives all taxes transportation, but also the logistics costs for the sector and says welcome.incurred. In the meantime, Bangladesh expects political During more the firstfavorable 11 months of the current winds to better kick start its construction industry and Pakistani cement quite the favorable fiscalenjoys year, Pakistani cement companies season. Northern cement units dispatched around sold more than 30.5 million tons, around 2.29 million tons of cement in May 2013, one million tons above the correspond24.3 percent of which were sent by sea to ing period of the last fiscal year. Cement external markets, mostly to Afghanistan, exports notched 7.7 million tons this fiscal while around 2.7 percent were dispatched year versus more than 7.8 million tons in SRI LANKA GETS NEW FACILITIES to India. The southern units provided the the last fiscal year for the first 11 months. In Sri Lanka, Holcim Lanka, which controls the largest local market share with 1.6 million tons sold per year, 38 MaY / JUNe 2013 BMWeek CW Group Coal Week CemWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE is actively expanding its production CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week capacity. The company is developing new facilities in Galle and Puttalam, as well as a new cement terminal in Trincomalee. The Galle additions, valued at USD 25 million, will more than double Holcim Lanka’s cement grinding capacity in the region. Capacity in Galle, which will totaled Rp 20.1 billion at the end of 2012. cut nearly in half in recent weeks. Over reach 1 million tons after the expansion On the other hand, the Sri Lankan the past two months, the Indian rupee becomes operational, currently totals government plans to ban foreign has fallen 10 percent against the dollar, 0.4 million tons per year, generated by a investments in several sectors including elevating import costs for Indian traders. grinding plant that uses imported clinker. cement, in a move to protect local Bangladeshi cement exporters report By comparison, the Puttalam investments manufacturers and retail traders, but drops of 45-50 percent over the period. totals USD 2-3 million and will be aimed this will not affect previously-approved A total of 5,600 tons of cement were at increasing the level of clinker; existing investments, including the USD 15 million exported last month to the northeast of Puttalam capacity is approximately 1 Pakistani cement manufacturing plant, India, versus 9,760 tons in May. The recent million tons. The terminal in Trincomalee, approved earlier this year for construction decline comes on top of a fall in exports of 57.82 percent year-over-year, to USD costing an estimated USD 5 million, is to near Hambantota. 14.58 million, in fiscal 2012-2013. The open in early August. Over the next six value of the dollar reached Rs 61.06 on months, Holcim expects its Sri Lankan BANGLADESH TENSED IN POLITICAL July 8, 2013, up from Rs 54.83 on January annual cement capacity to rise by 0.8 TURMOIL million metric tons, which will only add Cement shipments from Bangladesh to 1, before falling slightly. By contrast, in to the local company’s revenues which its sole export recipient, India, have been Bangladesh, as a result of higher foreign
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exchange reserves and lower imports, the local currency taka has gained 2.5 percent to Tk 77.75 against the dollar since January. A sluggish construction sector, resulting from weak performance by both real estate and governmental projects, reduced cement demand in Bangladesh by 10 to 15 percent between January and June. Cement production in the country declined 20 to 25 percent in the first six months of the year, and the price per bag fell 10 to 15 percent compared with last year. Prices now register Tk 400420 per bag. The political environment is contributing to the construction slowdown: the government is reluctant to carry out new public projects, and political instability generates high uncertainty in the private sector. CEMENT INDUSTRY SHINES IN PAKISTAN The Pakistani cement industry continues to show strong performance, with growth of 10 to 12 percent expected in the fourth quarter of fiscal year 2012-2013 (AprilJune). Domestic sales grew by 1 percent over the period, to 6.7 million tons from 6.6 million tons, and exports increased 13 percent to 2.2 million tons. Total sales were up 4 percent quarter-over-quarter, to 8.9 million tons from 8.6 million tons. The benchmark KSE 100-share index grew 16 percent over the same period. Continuous growth has characterized the cement sector for several months, with both domestic and global trends supporting the industry. Cement is expected to outperform all other sectors in Pakistan over the next season. Across the full fiscal year, domestic cement sales rose to a record 25 million tons, up from 23.95 million tons the previous year. Total industry sales for the fiscal year 2012-13 reached 33.43 million tons, of which only 8.37 million tons were exported. In spite of the strong domestic performance over the year, total sales remained lower than record sales of 34.22 million tons in 20092010, which included 10.65 million tons of export sales.
VARIATIONS IN PRICES FOR COAL AND ELECTRICITY Heavily reduced coal prices over the past two years in Pakistan have lowered the cost of cement production. Primary drivers of the low coal prices include a drop in demand from China and India, as economic growth pace slows down. Additionally, a major shift from coal to natural gas by power generators in the U.S., driven partially by increased shale gas production, has boosted exports of coal from the U.S. These factors combined to produce global coal consumption that grew only 2.5 percent in 2012, compared to a 10-year average of 4.4 percent. In spite of low coal prices, the Pakistani government is likely to increase electricity rates, a move that will boost cement prices by Rs 6-7 per bag. Industrial consumers will be subject to a first round of price hikes, while domestic ones will face price increases in the second round. The national grid produces 30 to 40 percent of the electricity utilized by the cement sector, with the rest derived from in-house electricity generation facilities. OVERALL PERFORMANCE OF PRODUCERS UNDECIDED In spite of the overall positive state of the industry, individual Pakistani cement companies registered mixed performance in the fourth quarter of the fiscal year 2012-2013. An earnings per share (EPS) of Rs 3.85 for Dera Ghazi Khan Cement represents a fall of 17 percent year-overyear, whereas Lucky Cement’s EPS of Rs 8.17 translates to a rise of 26 percent year-over-year. Earnings estimates for Dera Ghazi Khan are down 1.8 percent as
a result of lower than expected volumes, and those of Lucky are up by 1.6 percent on higher than expected exports to Afghanistan coupled with a positive sales mix. Overall, Pakistani cement exporters have reduced the price of their exports to Afghanistan by approximately Rs 300 per ton, in order to remain competitive against cheaper Iranian cement. The Pakistani firm Alkitan plans to expand into Iraq, with construction of a 0.20-square kilometer cement plant in Basra Province. The strengths of Basra as a development location include abundant investment opportunities and natural resources. NEPAL WAIVES TAXES FOR CEMENT INDUSTRY In other regional news, over the first 10 months of the fiscal year, cement imports in Nepal totaled Rs 3.34 billion, up 15.5 percent year-over-year from Rs 2.89 billion. Seven new cement factories have been established in Nepal so far in the fiscal year. To promote foreign investment in development projects, the Nepalese government waives customs, taxes, and VAT on cement imports. The Nepalese company Ghorahi Cement Industry has launched a new product, Sagarmatha OPC (Ordinary Portland Cement). The formula complies with Nepal Standards NS 49-2041, and the company is now seeking ISO 9001 certification. Sagarmatha cement is manufactured in a plant equipped with technology from KHD Humbolt of Germany and demonstrates strength ranging from 55-60 MPa. Cement of at least 53 MPa is considered high-grade.
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&K Governement forwards projects for 16 roads for approval under Central Road Fund while Punjab Govt. decides for overall highway update and the underground line linking Mandi House to ITO in Delhiu faces delay.
1 lakh crore in the next six months, which include construction of an Elevated Rail Corridor in Mumbai, two airport projects, two locomotive projects, power and transmission projects and one port project as well as construction of eight Greenfield airports in PPP mode at Navi, Mumbai, Goa, Juhu (Mumbai), Raigarh, Sriperumbudur, Pune and Bellary. The total cost of the projects is estimated to reach Rs 115 lakh crore.
NEW PROJECTS Jammu & Kashmir Govt mulls 16 new road projects The Jammu and Kashmir government has placed a proposal of 16 road projects before the Union Government under the Central Road Fund (CRF), a centrally sponsored scheme. The cost of each proposed road project is estimated to be below Rs 20 crore unless permitted by the Central government. The J&K government has convinced the Union government on the importance of proposed roads in terms of connectivity and economic added value and is hopeful of getting clearance for most of the projects. The CRF scheme was created to support the development of interstate connectivity and boosting the construction of roads with strategic economic importance. Cabinet approves INFRA projects for armed forces The Cabinet Committee on Economic Affairs gave its nod for the construction of residential and office buildings, as well as for border outposts at various establishments belonging to the Armed Border Force. The cost of the project is estimated
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to be around Rs 3,510 crore, and includes construction of 2.000 houses, 10 barracks at 12 sites and even non-residential buildings. The cabinet also gave its nod for construction of 113 barracks, hospitals and 180 other office buildings at various establishments of Assam Rifles, expected to be built at an additional cost of Rs 969 crores. Govt mulls more PPP projects Prime Minister Manmohan Singh, in his meeting with key infrastructure ministers and secretaries highlighted the need to ramp up investment in infrastructure. The PM doled out public private partnerships (PPP) projects worth more than Rs
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Dozen bridges to be built in MP A total of 12 major bridges will be constructed in the Bhopal district of Madhya Pradesh. The total cost of the project is estimated to be around RS 46 crore. The work on the bridges is expected to be complete in the next 5 to 6 years. The twelve bridges are to be constructed in various areas of Bhopal, such as Sehore, BerasiaGarha Kalan road, between the villages of Itawa Kalan and Itarsi, over the Nedi river, on Chorsa Kheri Dhaulpur road, over the Seep river in the village of Satdev and other areas. New Housing Project in Mohali Realty firm ATS infrastructure is going to build a Rs 400 crore housing project in
INFRASTRUCTURE AND CONSTRUCTION PROJECTS/EXPANSION TABLE NAME OF PROJECT
DATE/TYPE
COST IN INR
Jammu & Kashmir 16 new road projects
22 July 2013/New Project
INFRA projects for armed forces
22 July 2013/ New Project 4479 crore
320 crore (estimated)
LOCATION Jammu Kashmir
2 July 2013/ New Project IN 1, 15, 000 crore TABLE AVAILABLE THE July 2013/New project 46 crore New Housing Project in Mohali July 2013/New Project 400 crore ICCM PRINT EDITION Punjab Govt to upgrade all state highways July 2013/Update 3080 crore
All over India
Tunnel construction project in Delhi faces delay
Delhi
Govt mulls more PPP projects
All over India
Dozen bridges to be built in MP
Bhopal (Madhya Pradesh)
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Mohali (Punjabi) Punjab
Ministry gives technical clearance for Jaipur Metro
July 2013/Update
10000 crore (overall project)
Jaipur (Rajasthan)
Odisha to get 200 more bridges
July 2013/Update
700 crore
Odisha
TN govt gives nod for phase-II of Chennai ORR
July 2013/Update
985.44 crore
Chennai (Tamil Nadu)
execute the project, the Punjab government is inviting more investors. Six laning of 230 km national highways have already been completed in the past years, whereas work on nearly 398.9 km long stretch is going on in full swing and is expected to be complete by January 2016.
Mohali. The housing project is spread over 25 acres of land and will include construction of buildings that will offer 3-bedroom and 4-bedroom flats. The project will be completed by December 2016 and will offer several amenities such as a clubhouse with swimming pool, multi-purpose hall, a cricket pitch and a jogging track, among other amenities. update on projects Punjab Govt to upgrade all state highways The State government of Punjab has decided to upgrade all highways in the state into 4/6 lanes. The cost of upgrading is estimated to be around Rs 3.080 crore. To
Tunnel construction project in Delhi faces delay The construction work on a tunnel that will link the underground metro line nearby Mandi House to ITO in Delhi has been delayed as the executing firms – Larsen & Toubro and Shanghai Urban Construction Group are yet to receive a green signal from the Railways for the project. The executing firms had already received an approval for the construction of the tunnel, from the Delhi Metro Rail Corporation DMRC. Ministry gives technical clearance for Jaipur Metro The Railway Ministry gave technical nod for the operations in telecom, signal and electricity expansion at the Jaipur Metro Rail Project (JMRC). The clearance came after the Research Design and Standards Organization undertook research and assessment of the ongoing metro project. Once complete, the Phase-I of the Rs 10.000 crore JMRC project would cover 12.6 km from Mansarovar to Badi Chaupur in the capital city of Rajasthan. Odisha to get 200 more bridges The State government of Odisha is go-
ing to issue tenders for the construction of 200 bridges in the state at a cost of Rs 700 crore. The bridges would be built on 111 rural development and 82 Panchayat roads, while the tender process for the projects is expected to be complete by October 2013. The construction of the bridges is a part of the Biju Setu Yojana – a scheme launched by the State government in 2011 and aimed at improving rural connectivity with an overall expenditure of Rs 1.400 crore. So far, work on 57 bridges has already been completed under the scheme, whereas 180 bridges are still under construction. The State government is planning to expedite the construction works and has issued a fixed deadline for completion of all the projects. TN govt gives nod for phase-II of Chennai ORR The Tamil Nadu government has given its nod to a consortium of Ashoka Buildcon and GVR Infra Projects to construct phase-II of Chennai Outer Ring Road (ORR), from Nemilichery to Minjur in the state. Phase-I of the ORR from Vandalur to Nemilichery is on the verge of completion. Once finished, the Chennai ORR will help decongest the Chennai’s roads and will serve as a major link for connecting four national highways. The overall cost of the project executed under a design, finance, build, operate and transfer (DFBOT) basis would be Rs 985.44 crore, of which Rs 197 scrore would be provided by the State government as project support fund.
INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
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analyst recommendations ACC On account of better sales volumes and flat realizations, ICICI Securities LTD. has maintained its ‘HOLD’ rating for ACC, with a target price of RS 1,285, upgrading it from Rs 1,195. To the contrary, Prabhudas Lilladher Pvt. Ltd. has maintained the ‘REDUCE’ rating for ACC with a target price of Rs 1,080, reducing it from a CMP of Rs 1,223 because of uninspiring earnings outlook and expensive valuations, which the analyst expects are going to be affected due to the increase in freight and domestic coal prices. Recently, the company underwent a change in its ownership, with Holcim restructuring its stake and making Ambuja Cements the flagship company of ACC. The change in ownership, according to the group, will benefit the two companies as they expect to share synergy savings of Rs 900 crore in a phased manner, from logistics and supply chain operations. SHREE CEMENT Motilal Oswal has maintained ‘BUY’ rating for Shree Cements with a target price of Rs 4,686, slightly upgrading it from Rs 4,668. The rating has come as Shree Cement reported sequentially flattish cost trend. Prabhudas Lilladher Pvt. Ltd. has also recommended a ‘BUY’ rating for the company, with a target price of Rs 5,150 , upgrading it from a CMP of Rs 4,667. The recommendation comes based on a strong earnings outlook and attractive valuations for the cement company. On the other hand, ICICI Securities Ltd. has remained neutral and recommended a ‘HOLD’ rating for the company, with a target price of Rs 4,725, upgrading it from a CMP of Rs 4,667 due to expensive valuations. AMBUJA CEMENT Emkay Global Financial Services Ltd. has downgraded its rating for Ambuja Cement from ‘HOLD’ to ‘REDUCE’ with a target price of Rs 165 reduced from Rs 191. The recommendation comes following the restructuring exercise of Holcim in `its Indian operations, which the analyst expects is going to be negative for minority shareholders of Ambuja Cement; as the
42 JULY / AUGUST 2013
RATINGS CHAnGES Date
Broker
Company
Rating
Target Price
Current Price
1-Jul-13
ICICI Securities Ltd.
ACC
Hold
1,285
1,195
1-Jul-13
Prabhudas Lilladher Pvt. Ltd.
ACC
Reduce
1,080
1223
1-Jun-13
Motilal Oswal
Shree Cements
BUY
4,686
4,668
28-Jun-13
ICICI Securities Limited
Shree Cements
HOLD
4,725
4,667
1-Jul-13
Prabhudas Lilladher Pvt. Ltd.
Shree Cements
BUY
5,150
4,667
8-Jul-13
Motilal Oswal
Ultratech Cement
BUY
1,994
1,918
28-Jun-13
ICICI Securities Limited
Ultratech Cement
HOLD
2,040
1,872
22-Jul-13
Emkay Global Financial Services
Madras Cements
ACCUMULATE
250
199
25-Jul-13
Emkay Global Financial Services
Ambuja Cement
REDUCE
165
191
25-Jul-13
Angel Broking
Ambuja Cement
NEUTRAL
171
171
20-Jun-13
Motilal Oswal
JK Cement
BUY
483
243
28-Jun-13
ICICI Securities Limited
JK Cement
BUY
302
224
CW Group Coal Week CemWeek BMWeek INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group Coal Week
analyst recommendations
latter’s cash balance of Rs 3,800 crore is going to be repatriated to the promoter company (Holcim). Furthermore, the analyst also expects weak pricing to hamper the earnings growth outlook of the company. Meanwhile, Angel Broking has maintained a ‘NEUTRAL’ rating on the stock, with an unchanged target price of Rs 171. The analyst believes that the company is fairly priced at current levels and is expected to attract a holding company discount on its holdings in ACC. ULTRATECH CEMENT Motilal Oswal has maintained its ‘BUY’ rating for UltraTech Cement, with a target price of Rs 1,944, slightly up from its CMP of Rs 1,918. The positive rating has come because of the company’s decision to focus on increasing market share and
leadership. Under the current expansion plan, the company can easily increase its capacity by 20% over FY14-16 to 64.45 million tons, as against the current 53.95MT in FY13. Meanwhile, ICICI Securities Ltd. is neutral on large caps such as UltraTech, due to expensive valuations and has recommended a ‘HOLD’ rating, with a target price of Rs 2, 040, upgrading it from a CMP of Rs 1,872. MADRAS CEMENT Emkay Global Financial Services has recommended ‘ACCUMULATE’ rating for Madras Cements,with a target price of Rs 250, upgrading it from its CMP of Rs 199. The analyst has also declared Madras Cements as the preferred mid-cap pick. The recommendation comes as a result of the company’s lower cost structure
and management’s encouraging outlook on demand. The company’s management expects a demand growth of 8% in FY 14, mostly driven by government’s spending on infrastructure and rural housing projects. JK CEMENT Motilal Oswal has recommended a ‘BUY’ rating for JK Cement, with a target price of Rs 483, upgrading it from the CMP of Rs 243, as it expects demand and pricing to recover from the second half of FY14. ICICI Securities has also recommended a ‘BUY’ rating for JK Cement, with a target price of Rs 302, upgrading it from Rs 224. The positive recommendation has come on account of growth in sales volumes and earnings, improvement in return ratios and inexpensive valuations.
INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
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CW Group Meeting Agenda
The CW Group will be hosting and participating in a number of webinars and conferences. We invite you to join us on-line or in person at the events to discuss our views of the industry.
CW Research & Analytics Webinars: 2013 India Cement Business Sentiment update
August 29, 2013 at 2:00 PM GMT
Global Cement Volume Outlook - CW mid2013 update
September 5, 2013 at 2:00 PM GMT
2013 Brazil & Americas Cement Business Sentiment update
September 26, 2013 at 2:00 PM GMT
The world of White Cement - a bright spot in a gray world?
October 3, 2013 at 2:00 PM GMT
CW Group Hosted Executive Summits: Caribbean Rim & South America Cement Finance, Strategy & Trade Summit 2013
September 1112, 2013
• Le Meridien • Panama City, Panama
Middle East Cement Finance, Strategy & Trade Summit 2013
December 1011, 2013
• Emirates Towers • Dubai, UAE
Conferences where the CW Group will be presenting: Solid Fuel Summit (SFS) India 2013
October 7-8, 2013
• Hilton Mumbai International Airport Hotel • Mumbai, India
Cement Business & Industry (CBI) India 2013
October 9-10, 2013
• Hilton Mumbai International Airport Hotel • Mumbai, India
CBI Brazil & LatAm 2014 Cement & Lime Conference
February 5-6, 2014
• Hilton Morumbi • Sao Paulo, Brazil
Cement Business & Industry (CBI) Africa 2014
June 4-5, 2014
• Hyatt Regency • Johannesburg, South Africa
from cemweek.com
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: Jaypee to sell cement unit by year's end
1
Votorantim elects former Holcim exec to its board
2
Holcim set to restructure India operations
2
Cementos Molins buys Cemex plant in Spain
3
Madras Cement to install new grinding unit
3
Holcim to sell New Caledonia unit
4
Jaypee Cement nixes plan to sell Gujarat unit
4
Madagascar cement market struggling
5
India: Orient Cement to build plant in Karnataka
5
Semen Indonesia looking to buy cement plant in Bangladesh
6
CCI okays stake sale in Lafarge India
6
CRH, Vicat jockeying for Shiram cement unit
7
Ultratech Cement lines up new cement plant
7
Galilei, HeidlelbergCement to build plant in Angola
8
Cement plant mulled in India's Nagaland
8
Holcim sets sights on bigger slice of French cement market
9
India: Convincing performance for Loesche's mill
9
Senegalese President denies Dangote allegations
10
UltraTech Cement to set up plant in Katni district
10
New Mozambique cement industry study: The rough diamond of South-Eastern Africa
11
India cement prices increased 11
Belarus: CITIC starts initial production at new line
12
India Cements set for revamp 12
Peru: Cementos Yura expanding unit
13
Shiram Cement to sell off cement unit 13
Holcim to build new plant in Russia's Volsky
14
India: Supreme Court asks CCI, BAI to respond 14
Cambodia cement maker working on second plant
15
India: UltraTech looking to expand market share 15
China: New Lafarge unit ready by July
16
India: Cartel fines to make dent on firm profits 16
Lafarge announces new personnel appointments
17
Analysts: India cement prices not yet out of the woods 17
Indonesia: Fuel hikes to affect cement prices
18
India: Heidelberg Cement looking to expand 18
New Zealand: Fire hits Holcim plant
19
Madras Cement to expand operations 19
McInnis Cement launches new website
20
India: ACC launches corrosion proof product in Andhra Pradesh 20
Cemex disputes stake sale in Lithuania
INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE
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M ct um ob Re e bai gis r 7 , In te -8, dia r To 20 da 13 y!
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OctOber 7-8, 2013 | MuMbai, india HiltOn MuMbai internatiOnal airpOrt HOtel
the Solid Fuels Summit india 2013 is a focused executive-oriented meeting and networking opportunity for coal and petcoke industry professionals who are involved in the indian coal and petcoke sectors. the Summit will bring a special dual focus on business and industrial issues and the program will include topics such as: » » » » » » »
assessing india’s solid fuel needs: coal & petcoke Solid fuel opportunities beyond today – trinity of sectors Mining technology & maximizing productivity for coal reducing costs through better technology petcoke – a threat to indian coal? Fuel waste – trash or treasure? the international trade & bulk handling perspective
COal * PeTCOke * a lTeRnaTIve Fuels * Fly a sh
GMI
GLOBAL
Organized by gMi glObal witH tHe great SuppOrt FrOM cOalweek tHe event iS expected tO bring a FOcuSed grOup OF cOal and petcOke induStry prOFeSSiOnalS.
regiSter On-line at www.gMiFOruM.cOM Or eMail SaleS@gMiFOruM.cOM. yOu May alSO call uS in tHe uS at +1-203-516-7424