India Cement & Construction Materials (vol 1 / issue 29) by CemWeek

india A CemWeek Publication

ISSUE 29

CEMENT

MARCH-APRIL 2016

& CONSTRUCTION MATERIALS

CW RESEARCH HIGH-SULFUR IMPORTED PETCOKE PRICES INCREASE feature INNOVATING A SUSTAINABLE CEMENT INDUSTRY CW RESEARCH 2016 INDIAN CEMENT MARKET FORECAST

FEATURE

CAPTIVE POWER PLANTS: THE SOLUTION WITHIN News

Analysis

Market Coverage

Interviews

People

The must-have cement and clinker

price intelligence

chartbook

Global Cement Trade Price Report We know that the everyday challenge for cement traders, independent traders, shippers as well as buyers in cement sector is the pricing strategy. The Global Cement Trade Price Report is CW Research’s benchmark price assessment for monthly gray cement, white cement, clinker and granulated blast furnace slag market prices, imports, exports and ex-works.

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Published on a quarterly basis, the GCTPR brings you all the cement sector's insights and helps you gauge what’s driving the cement market. We consistently track cement trade prices to keep you informed, so that you can make the best strategic decisions. For more information visit: http://goo.gl/eib8fE

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FEATURES

DEPARTMENTS

4 Captive power plants: the

EDITORIAL LETTER

A closer look at how Indian cement companies try to achieve cost and energy-efficiency and independence from national power grids

NUMBERS IN BRIEF

solution within

12 Cement Volumes Forecast Report Rock-solid 2016 cement market forecast for India

16 Innovating for a sustainable

cement & concrete industry

S ustaining business growth and social and economic returns through innovation

20 High-sulfur imported petcoke prices increase 5%+

Petcoke import prices and evolution reasons

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ROBERT MADEIRA

Performance of India’s Cement Sector

ANALYST RECOMMENDATIONS

Latest Broker Recommendations

& CONSTRUCTION MATERIALS

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Efficiency and independence

CEMENT

research and analytics

CEMWEEK PUBLISHER HEAD OF CW GROUP RESEARCH

GABRIEL BURETE CONTENT EDITOR & ONLINE COORDINATOR

LUCIANA MURARASU MARKETING & COMMUNICATIONS COORDINATOR

34 36

Cement Volumes Cement Energy

LIVIU DINU

Infrastructure & Projects

CONSTRUCTION AND BUILDING MATERIALS

RALUCA CERCEL SILVIU STEFANESCU STEFANA ABICULESEI SUSHMITA RAI

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LETTER FROM EDITOR

EFFICIENCY

AND INDEPENDENCE The cement industry is increasingly looking for viable ways to create the conditions for higher cost and energyefficiency and add a major benefit to day-to-day operations: independence from national power grids and their potential failures. The 29th issue of the India Cement and Construction Materials Magazine (ICCM) covers captive power plants, as the solution for improving business indicators.

s key cement players worldwide keep looking for the best ways to increase efficiency and quality, this issue of our magazine also looks into the role played by innovation in the creation of sustainable approaches. Alta Schoultz, Head of Innovation, PPC Ltd, Johannesburg, South Africa analyses the ways in which technological creativity can make that possible, in a feature story that details the process of creative destruction. The 29th issue of the India Cement and Construction Materials Magazine (ICCM) also feature an analysis of petcoke prices, made by the CW Research team. Find out more on the increase of high sulfur imported petcoke prices and cement demand in India, as well as other

MARCH / APRIL 2016

relevant indicators, in this excerpt from the CW Groupâ&#x20AC;&#x2122;s bi-monthly report. And as usual, India Cement and Construction Material Magazine provides all the relevant news about the main indicators of the industry, including the latest facts and figures about cement volumes, energy prices, relevant people in the business, regional developments, equipment and construction projects. Donâ&#x20AC;&#x2122;t miss out the numbers and the trends laid out in the special sections.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Gabriel Burete

CONTENT EDITOR & ONLINE COORDINATOR

NUMBERSIN BRIEF LARGEST CEMENT MAKERS’

EARNINGS DISAPPOINT

Cement manufacturers face the results of the global economic environment. Chart: revenue (million USD) Out of the top five cement manufacturers, LafargeHolcim is the leader in terms of revenue results by standing at about USD 30.7 billion, in 2015. The company’s EBITDA margin declined by 3.5

percentage point from 2014, due to the challenging economic context and to the negative foreign exchange fluctuations.

CEMENT MANUFACTURERS FACE THE RESULTS OF THE GLOBAL ECONOMIC ENVIRONMENT. CHART: REVENUE (MILLION USD) 45,000 30,662 26,235 14,127

15,000

LafargeHolcim

CRH

Cemex

CRH has the second best performance in the group in terms of revenue by reaching levels of USD 26.2 million in 2015, an increase of 25.0 percent when compared to 2014. This resulted from acquisitions (such as the purchase of assets from Lafarge and Holcim) and a strong US market with normal weather patterns at the start of 2015, which led to higher volumes of sales. Cemex revenue stood at USD 14.1 billion (down 8.0 percent in comparison to the previous year). The company shows the largest EBITDA margin of the group with 18.7 percent, the company’s

4,776

2,591

Italcementi

Heidelberg

Source: annual reports

30,000

highest level in 6 years. Cemex reached these numbers by contracting costs across the company and also by selling global assets to cut debt. Italcementi’s EBITDA margin stood at 13.6 percent a decline of 2.1 percentage points. Heidelberg EBITDA margin stood at 8.1 percent, and increase of 2.2 percentage points from 2014. This improvement was due to the company’s cost savings.

CHART: EBITDA MARGIN (%) 20% 18.7% 15%

15.8% 9.4%

8.1%

Cemex

LafargeHolcim

Italcementi

CRH

Heidelberg

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

Source: annual reports

13.6% 10%

FEATURE

CAPTIVE POWER PLANTS:

THE SOLUTION W Cost and energy efficiency and production continuity through power independence are constantly sought by cement companies. And captive power plants might just be the perfect solution for that.

MARCH / APRIL 2016

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

WITHIN

Source: google.com

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

FEATURE he cement industry is increasingly looking at captive power plants as a viable solution to improve several business indicators at the same time. New company-owned and operated power plants create the conditions for higher energy-efficiency and add a major benefit to day-today operations: independence from national power grids and their potential failures, as well as highly prized production continuity.

CAPTIVE POWER FOR INDEPENDENT PRODUCTION A captive power plant is a facility that is dedicated to providing a localized source of power to an energy user. These are typically industrial facilities or large offices. The plants may operate in grid parallel mode with the ability to

In cement plants, 25 to 30% of New projects add to power demand can be met through existing ones, as the benefits of captive generating power from waste heat. power plants are more and more obvious. However, there are significant costs associated to export surplus power to the local electricity such important expansions and there is distribution network. Alternatively they a variety of technical solutions. Hence may have the ability to operate in island the importance of careful analyses before mode, that is independently of the local deciding to invest. electricity distribution system.

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Captive power plants are a form of distributed generation, generating power close to the source of use. Distributed generation facilitates the high fuel efficiency along with minimizing losses associated with the transmission of electricity from centralized power plants. The main benefits of captive power plants are the security of power supply through self-generation, the reduced costs through high fuel efficiency and the improved environmental performance resulting from fuel efficiency. Adding to that, captive power plants used in cement factories increase overall efficiency by recovering some of the heat generated in the cement making process.

JK Cement's thermal power plant (Nimbahera)

In cement plants, about 90% of total additional waste heat is available from preheaters in China and Europe have energy is used as heat energy in the clinker the kiln gases (preheater exit gas) and power production installations. Heat calcination process. Out of the total heat cooler exhaust air. This heat can be used recovery for power production may not consumed in the clinker calcination for electricity production. Power can be feasible in plants where the waste heat process, more than 35% is discharged as be produced by using a steam cycle, an is used in raw mills to extensively dry waste heat, without utilization. Therefore, organic ranking cycle, or the KALINA the raw material - which offers a more a great deal of energy is wasted, and process. The low temperature level of the efficient and economic option. the heat pollution in the workplace is serious. A waste heat recovery captive power plant can effectively utilize the low temperature waste If resources like gas and coal are available Historically the growth of heat of the exit gases. The captive plants in India has for producers, two-thirds of the industrial greenhouse gases emission been quite steep. Just after the consumption can be met by existing CPPs reductions due to recovery Independence, in the late 1940s, of heat and displacement the country had only 544 MW of fossil fuel by generation of non-utility plants generating of steam and electricity are about 1300 GWh. With industrialization, considered as emission reductions of the waste heat in cement plants (200 – 400 in the early 1980s, and lesser reliability project activity. °C) limits the efficiency to a maximum of state-owned supply, the captive of 20 – 25%. However, 25 to 30% of the Waste heat from cement kilns is generally plant's power demand can be met through capacity addition received a boost which used for drying of raw materials and generating power from waste heat. Heat continues even today. The electricity act fuel. Depending on the humidity of the recovery for power is most economical of 2003 has legislatively facilitated the raw materials and the cooler technology, for long dry kilns but long dry kilns with setting up & operation of captive power

IN PURSUIT OF EFFICIENCY

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

FEATURE plants. Other policies such as the National is one of the most important raw materials cement companies get an uninterrupted Electricity Policy 2005, the National for the cement industry and accounts for power supply. Tariff Policy 2006, the Captive Power almost 30% of the total cost of cement Some companies, such as Madras Policy (draft) and various state Cements, have put up captive policies contains the clauses power plants to take care of all relevant to encourage the their electricity requirements, development of captive power Currently, the captive power plants while for others it is just a part plants in India. Presently the of the solution for meeting their capacity accounts for nearly one-fifth of captive power plants capacity energy needs. Such is the case of accounts for nearly one-fifth the total installed capacity in India. ACC Ltd, for which captive power of the total installed capacity accounts for 72 per cent of its of the country. manufacturing. By putting up captive requirements. As the cement companies Faced with rising power costs and power plants, cement companies hope expand their manufacturing capacity, uncertainty over supply, cement to control this cost to the largest extent they will simultaneously invest in captive companies have been investing in captive possible. More than the saving on power power plants, sourcing coal even through power plants for several years. Electricity costs, captive power plants ensure that the imports. A million-ton cement plant will

With its 4 x 330 MW & 5 x 660 MW installed capacity, Mundra became the largest single location power station in India.

MARCH / APRIL 2016

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

require about 20 MW of power capacity, according to industry sources. Estimates released by the Cement Manufacturers' Association indicate that modern cement plants consume 68 to 93 energy units to produce a ton of cement while the older ones use up 100120 units. For most cement companies, power produced from coal-based captive plants is cheaper by up to Rs. 2.50 a unit, giving them a huge saving in production cost. ACC's average cost of electricity from its captive plants is Rs. 3.72 a kWh, against Rs. 4.86 for grid power. Using diesel generating sets pushes up the electricity cost to nearly Rs. 13-15 a

Power Producers Association says that industries consume over 35-40 per cent of the total power consumption and that there are about 2,500 captive power plants (CPP), with an average power production capacity of 20 mw or more. “If resources like gas and coal are available for producers, two-thirds of the industrial consumption Captive power generation provides can be met by existing an attractive ‘niche’ for renewable CPPs,” he says.

unit now. Hence, most companies prefer to keep their diesel generating sets idle. Besides captive coal-based power plants, the cement companies are also generating electricity using the waste heat recovered.

energy to be deployed in industry.

However, the need for additional power is still high. According to the latest data issued by India’s Central Electricity Authority’s, September 2014 saw a 4.1 per cent power demand-availability deficit with demand at 89.143 million units and the power availability at 85.509 mu. A year before, the deficit was about 3.4 per cent. Rajiv Agrawal, Secretary, Indian Captive

Typically, power from the conventional state electricity grid costs above Rs 6 per unit, while diesel-powered generators (for back-up) incur Rs 17 per unit. On the other hand, power from CPPs vary between zero and Rs 15 per unit depending on the raw material used. If it’s a gas-based plant, cost will be upwards Rs 15 per unit, while for furnace oil plants, costs are above Rs 10 per unit.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

FEATURE The most economical turn out to be the coal-based plants that deliver power starting at Rs 2 per unit. But, this may not be an attractive option for companies considering the coal shortage in India. Importing coal at nearly thrice the domestic price makes the whole proposition expensive. This leaves companies with solar, whose per unit power cost is zero, not counting the minimal costs on operations and maintenance.

NEW CAPTIVE POWER PROJECTS The high efficiency of solar power was the reasoning behind the decision of OCL India to invest in that technology. The company has just inaugurated a 5.5MW solar power plant, to be used by its cement grinding plant in Salboni, Bengal. The 1.35Mt/yr grinding plant was set up

in 2014 with an investment of US$93m. operates two cement plants at Kapilash "Our plant at Paschim Medinipore is and Rajgangpur in Orissa with a combined located strategically to ensure timely and production capacity of 5.35Mt/yr. faster delivery of cement across the state. The efficiency of using captive power West Bengal is plants is not something new an emerging for Indian cement producers. market for J.K. Cement was the first infrastructure development The momentum of new projects with a host of projects under indicates that the installation of implementation captive power plants in future is likely and thereby to grow at a higher rate compared to auguring well for the cement the current rate of growth. industry in Eastern India. In our first year of operations in Medinipore we company in the field to install captive are already operating at 95% capacity power plant, in 1987. J.K Cement is also utilization," said Amandeep, director and the first cement company to install a CEO of OCL India. He added that the waste heat recovery power plant to take solar plant will be the first and largest of care of the need of green power. Today all its kind in West Bengal. OCL India also of JK Cementâ&#x20AC;&#x2122;s plants have captive power

The efficiency of using captive power

MARCH / APRIL 2016

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

JK Cement's power plant (Gotan)

facilities, except for the grinding unit at Jhajjar. At its different locations, the company has captive power generation facilities of over 140.7 MWs including Waste Heat Recovery of 23.2 M.W. Another producer who plays on the benefits provided by captive power is Anjani Portland Cement, which captive power plant having a capacity of of 4.8 metric tons per year (mtpa). was cleared to raise funds for such an 300MW would also come up at the site. Simultaneously, the plant is likely to have expansion project. The The investment in a clinker capacity of 2.9 mtpa and captive Securities and Exchange the project would power plant of capacity 75 MW. The total Board of India approved be Rs 2,000 crore. cost of the project is Rs.40 billion. The Anjani Portland Cement project is scheduled to be ready for a rights issue to raise The main benefits of captive power plants by February 2017. US$11.3m. The proceeds are the security of power supply through The momentum of new projects from the offering will be indicates that the installation of self-generation, the reduced costs used to build a 16MW coalcaptive power plants in future based captive power plant through high fuel efficiency and the is likely to grow at a higher rate at one of the company's improved environmental performance. compared to the current rate of cement plants. The Board growth. The promise for future received draft documents for the rights issue on 30 December 2015 and "The captive power plant would be used growth of captive power plants lies issued its 'observations' on 23 March 2016. for the cement project and the balance with the renewable sources of energy. Issuance of 'observations' is considered as would be consumed by other group Fossil fuels are limited and have adverse environmental impact. Captive power a clearance to the issuer to go ahead with companies," said company officials. generation, therefore, provides an the share issues. Another project is the one developed attractive â&#x20AC;&#x2DC;nicheâ&#x20AC;&#x2122; for renewable energy to In turn, JSW Steel will start a Rs 700-crore by Reliance Cement Co. in Yavatmal, be deployed in industry. cement plant at Salboni in West Bengal. A Maharashtra, which will have a capacity

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

FEATURE

Rock-solid 2016 cement market forecast for India India leads the group of developing Asian countries, that showcase the fastest growth in cement demand, according to the new 1H2016 Quantitative Update to the Global Cement Volume Forecast Report. India stands out with highly favorable conditions created by the weak monsoon and the governmentâ&#x20AC;&#x2122;s plan to invest heavily in infrastructural projects. The document recently published by CW Research forecasts a six percent growth in demand for building materials for the Indian industry, in 2016.

12 MARCH 12 JANUARY / APRIL- 2016 FEBRUARY INDIA 2016 CEMENT INDIA & CONSTRUCTION CEMENT & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE

INDIAN CEMENT SUPPORTED BY ECONOMIC OUTLOOK

ndia is the only major emerging market that continues to grow while other BRICS members (China, Brazil, Russia and South Africa) all decelerate. In fact, Brazil is in the midst of its worst economic recession in the past 25 years, a situation that poses a spillover risk for the rest of the world economy. Though passing some key structural reforms remains difficult in India, last year ended with increased investment rates, thanks to public infrastructure developments and a much more motivated private investment sector. More so, private consumption increased due to higher wages and improved benefits for employees in the public sector. India’s government forecasts that the economy could grow at a 7.5 percent rate, despite growth decelerating to 7.3 percent in the last quarter, compared to 7.7 percent in the previous one. Despite the positive economic outlook, the forecast for the infrastructure sector is not favorable for the short term as toll-roads continue to reel under the burden of negative wholesale price index. The Union Budged approved at the end of February 2016 laid out a clear program for boosting the country’s infrastructure sector. As part of the budget, the public private partnership mode of infrastructure development will be revitalized. Total investment in the road sector is established at Rs 97,000 crore between 2016 and 2017, while 10,000 kilometers of national highways are to be approved in the coming year. The total outlay for infrastructure projects for the upcoming financial year is Rs 221,246 crore.

REGIONAL CONDITIONS HELP TOO

Growth in emerging and developed Asia is expected to moderate over the medium term, but to continue to remain robust. CW Research’s update indicates that reduced macro-economic vulnerability and domestic policy reforms in India, coupled with the resilience of importing

countries in East Asia, are creating a favorable scenario in South-East Asia. The World Bank expects economic activity in the region to grow by 7.3 percent in 2016, up 0.3 percent year-on-year. In January 2016, OECD forecasted a compound annual growth rate of 6.2 percent between 2016 and 2020 for East Asia-Pacific and estimated that 2015 ended with real GDP growth rate reaching 6.5 percent. Private consumption will take the lead as the most significant growth driver, whilst exports will contribute less than in the past to the region’s economic performance. The most significant downside risk continues to be China’s slower growth model, which will continue to have a ripple effect through the region, especially for economies tied through trade and investment channels with China. United States’ monetary normalization, which leads to rising interest rates in the US, will exert a downward pressure on currencies vis-à-vis the USD across the world, including Asian countries, and upward pressure on domestic interest rates. A consequence of rising domestic interest rates, real GDP growth will tend to slow down in near term, while currency depreciation may be a stimulus for exports and real growth. US’s monetary normalization will also lead to a further slowdown of capital inflows into Asian markets given that their return advantage over US assets are diminished. Moreover, international investors are reducing the weight of riskier emerging market assets in their portfolios. Regional integration remains, in the eyes of OECD and World Bank analysts, one of the main factors preventing more sustained growth in the region: strengthening regional ties is needed to boost growth in the face of global uncertainty. Accounting for more about 45 percent of the global construction industry, the construction and infrastructure sector in Asia will expand by 4 percent in 2016. In China, continued investments in infrastructure will support overall Source: chicagomag.com

13 13

INDIA CEMENT INDIA & CONSTRUCTION CEMENT & CONSTRUCTION MATERIALS MAGAZINE MATERIALS MAGAZINE JANUARY - FEBRUARY MARCH / APRIL 2016 2016

FEATURE investment, yet IMF analysts forecast that environmental infrastructure, railway the global macro-economic landscape the stimulus will be unsustainable in the network for inter-city purposes, and is expected to remain lackluster, in 2016. Several developments, such as the long term. The impact of the slower growth shanty town redevelopment. lowering of oil prices and geo-political model China has embraced, focused now more on domestic consumption rather To boost the construction sector, China is imbalances, that marked 2015, will than production, is softened by lower set to encourage infrastructure investment continue to leave their imprint in 2016. international oil prices. Nevertheless, the through its “one-belt, one-road” policy. The However, by far the most pressing issues manufacturing sector, the backbone of the project is meant to link China with Europe this year are expected to be weak capital through central flows to emerging economies, reduced Chinese economy, will remain and western global trade and the continuing downturn under pressure on the back Asia by means in commodity prices. of a weakened commodity demand and oversupply in According to the IMF several sectors, including the India’s government forecasts that the October 2015 update, cement one. economy could grow at a 7.5 percent rate growth in 2015 stood at 3.1 percent, 0.2 percent The property market is of public private down when compared to the IMF’s July showing encouraging signs p a r t n e r s h i p s forecast, highlighting uneven prospects of recovery, in particular in first tier and selective second tier cities. that would allow private investments into across countries. For 2016, the IMF expects global recovery to be more gradual However, housing will be the slowest domestic infrastructure. and to reach 3.4 percent. The World growing sector, projected to grow at only January 2016 forecast depicts a less 2.5 percent annually until 2020, and by LOWER EXPECTATIONS FOR Bank’s optimistic scenario, with overall global 4 percent annually from 2020 to 2030. growth at 2.4 percent in 2015, expected to The infrastructure sector will remain THE GLOBAL ECONOMY supportive of the country’s economy, and The good news for India’s cement market reach a modest 2.6 percent in 2016. is likely to diversify to the following areas: and overall economy come at a time when The consensus among forecasters is that advanced economies are expected to be ASEAN, CHINA, AND INDIA REAL GDP GROWTH more resilient in comparison to the recent YoY change (%) past, while emerging economies, which still account for the lion’s share of world 2014 2015 2016 growth, are feeling the sting of commodity price decline, overhangs from past rapid India credit growth and from China’s slower growth model. China The main medium term risks for countries fitting the profile of emerging economies come from spillovers from China’s growth realignment, and the contingent effects of the recession in Brazil and South Africa.

Myanmar Lao PDR Cambodia Singapore

ASEAN CAGR 20162020 6.2%

Vietnam Viet Nam Thailand Emerging Asia CAGR 2016-2020 5.2%

Philippines Malaysia Indonesia 0%

Source: CW Research, IMF

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

CEMENT MARKETS OUTLOOK

AND

Out of the developing markets, Asian countries - excluding China - continue to showcase the most encouraging growth rates. A mix of positive developments are at the heart of India’s booming cement industry. Last year’s weak monsoon supported sustained investments in housing and infrastructure, as rainfall was

15 percent on average below the normal level across the country. The dry season gave way to construction works that helped increase cement consumption by 10 percent in 2015. Moreover, with infrastructure accounting for about half of the construction sector, the current government’s plan to heavily invest in infrastructure projects will definitely facilitate a sustained growth for cement consumption. As a result, the 1H2016 Quantitative Update to the Global Cement Volume Forecast Report estimates that demand for the building material in India will grow at over 5 percent in 2016, while growth from 2015 to 2020 is projected to reach a CAGR of almost 7 percent.

INDIA GDP FROM CONSTRUCTION (IND billion) Construction GDP

QoQ % change

5,000

700

4,500 2,500

20% 600

4,000

15%

2,000 3,500

500 10%

3,000 1,5 00 2,500

5%400

2,000 1,000

300 -5%

1,500

-10% 200

500 1,000 500 0 -

Q1 2014 2011 Q2 20142012Q3 2014 2010 2013 Q4 2014 2014

Q12015E 2015

Q2 2015 2017E Q3 2015 2018E Q4 2015 Q1 2016 E 2016E 2019E 2020E

-15% 100 -20% -

Source: CW Research

On a per capita basis, consumption in India is projected to increase at a CAGR of more than 5 percent over 2015-2020. Continued economic growth, at higher rates in 20162020 than seen in 2015, will provide the basis for continued investments in key drivers for cement consumption.

additions from 2015 to 2020 would stand at 40.0 million tons. The updated report now forecasts that the second largest

Lower commodity From 2016 to 2020, the CWGVFR report prices and falling oil prices, while forecast total capacity additions to reach having a negative 104.5 million tons of cement. impact on emerging markets such as Brazil, South Africa and Indonesia, will prove positive for near-term growth cement producer in the world will add in many of the developed economies. over 70 million tons to its existing cement Excluding impact of other commodities capacity. In net terms, this is a revision by costs, lower oil prices are expected to have 29.5 million tons for India. a rather positive impact on demand in India, the United States, as well as much of In 2015, CW Research estimates that total global cement capacity additions reached Europe. 64.4 million tons. Asia ex-China countries, in particular India and Indonesia, are the INDIA’S CAPACITY ON THE leading global markets in terms of capacity additions. In 2015, the scenario in China is RISE AS WELL Out of the set of countries tracked by the one of stark contrast with the recent past, CW research Analysts, the biggest positive with capacity shrinking by 20.1 million tons capacity revision in this release of the in 2015. From 2016 to 2020, the CWGVFR Volume Forecast Report is for India. The report forecast total capacity additions to 2H2015 release estimated that capacity reach 104.5 million tons of cement. Asia

ex-China countries are expected to add 82 million tons to the figure. When looking at the largest cement markets (with the exception of India and China), emerging economies continue to be the leaders in capacity growth from 2015 to 2020.

THE GLOBAL CEMENT VOLUME FORECAST REPORT

CW Group’s GCVFR survey is a twiceyearly outlook on cement market tonnage volumes. The report contains global, regional and key market forecasts developed using the CW Group’s in-house data series encompassing production, consumption, imports, exports, and per capita consumption for all countries in the world. The 74-page study also includes capacity outlooks and cement manufacturing utilization rates for major markets. To purchase the 1H2015 Quantitative Update to the Global Cement Volume Forecast Report contact sales@cwgrp.com.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

FEATURE

INNOVATING A SUSTAINABLE CEM INDUSTRY Alta Schoultz, Head Innovation, PPC, Johannesburg, South Africa has 25 yearsâ&#x20AC;&#x2122; experience in the cement and lime manufacturing industries. Recent projects include the PPC Imaginarium and the Cement & Concrete Cube, an industry web-based collaboration platform.

nnovation complements technology and it will increasingly become part of every facet of modern life. Every product and every industry are subject to a process of creative destruction. Technology has democratized innovation through connectivity and social collaboration. The construction and concrete industry, estimated to be worth 10% of global GDP, is responsible for most of the modern worldâ&#x20AC;&#x2122;s infrastructure and associated economic development. Hence the enormous potential for development that

innovation creates in cement production, one of the most life-changing industries. Global cement production has increased to 4.3 billion tons in 2014, with a significant impact on resources. The World Business Council for Sustainable Development reports that buildings contribute as much as one third of greenhouse gas (GHG) emissions and 40% of global landfill waste. But the sector also offers the biggest opportunity for a reduction in greenhouse gas emissions.

16 16MARCH JANUARY / APRIL - FEBRUARY 2016 INDIA 2016 CEMENT INDIA CEMENT & CONSTRUCTION & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE

CEMENT MANUFACTURING RESPONSE In the assessment of the eco-impact of a product or process, energy is a central theme and the subsequent main focus is on energy efficiency. The main initiatives to improve the eco-impact of cement production are therefore focused on a reduction in resource and energy requirements. Energy accounts for a high proportion of production costs and thus, for economic reasons, process engineering

MENT

solutions remain critical for fuel and electrical energy efficiency. The industry has responded to the threat of global climate change and has significantly reduced its eco-footprint, using three major strategies: improved efficiency through new technology; the use of alternative fuels, materials and renewable energy, and the reduction of clinker content through the use of supplementary cementitious materials, such as fly ash and ground granulated blast-furnace slag. These initiatives achieved a reduction of

17% in the specific net CO2 emissions per ton of cementitious product since 1990, from 756kg/ton to 629kg/ton. Concrete is, by mass, the most commonly used construction material in the world - 85% of modern construction materials is concrete. Although concrete, when compared to other building materials has a comparatively low embodied energy value, it has a significant impact by absolute volume, attracting much attention in the media.

THE CURRENT FOCUS IS ON INNOVATION After significant improvements in cement production processes and technologies over the last few decades, the remaining potential for further reduction of the carbon footprint is limited. The use of limestone as the primary raw material for clinker manufacturing is a fundamental barrier to emissions reduction. Further improvements are now directed at increasing efficiency in the use of cement through innovative design, construction Source: CW Group

17 17

INDIA CEMENT INDIA & CEMENT CONSTRUCTION & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE JANUARY MARCH - FEBRUARY / APRIL 2016 2016

FEATURE The industry has significantly reduced its eco-footprint, using three majos strategies such as the reduction of clinker content through the use of supplementary cementitious materials such as fly ash and ground blast-furnace slag

Source: CW Group

processes and technologies.

alternative

building

life cycle. This approach uses design, construction and building management to maximize resource efficiency and reduce waste, water and energy consumption. Typically,

Sustainability requires more than a narrow focus Sustainability is important to the on the carbon footprint of well-being of our planet and our continued the cement human development product at the factory gate. Measuring eco-efficiency is a way to maximize 80-90% of the energy used during a environmental and economic benefits, buildingâ&#x20AC;&#x2122;s life-cycle is consumed during while simultaneously minimizing both the in-use phase, so whilst the embodied environmental and economic costs. In a energy of the construction materials is full eco-efficiency evaluation of cement, important we should design for energy we also consider the environmental efficient operation. costs and the diverse economic, social and environmental benefits of the use of cement and concrete. Using a systems approach, linking innovation and sustainability, we should shift our thinking towards sustainable construction and the intelligent use of concrete in sustainable structures with a minimal total impact during its

NEW MATERIALS, TECHNOLOGIES AND SUSTAINABLE CONSTRUCTION

Recent advances in materials development include innovative organic chemical

18 18MARCH JANUARY / APRIL - FEBRUARY 2016 INDIA 2016 CEMENT INDIA CEMENT & CONSTRUCTION & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE

admixtures for concrete: plasticisers, setting retarders and accelerators, shrinkage-reducers and air- and waterentraining admixtures. More recent innovations include embedded microdevices for structural monitoring, phasechanging materials, and additives for selfhealing and self-curing of concrete. The commercial development of alternative binders such as calcium sulfo-aluminate cements (CSA), Novacem (magnesium based), geopolymers, calcium aluminate cements (CAC), Celite cement and alkaliactivated cement have enjoyed industry attention. Alternative building technologies such as pre-cast, tilt-up and light steel-frame is beginning to replace traditional brick and mortar building in some markets. Although 3D-printing materials are not new, we have seen rapid advances in the use of concrete to print complete

infrastructure to protect intellectual property does not exist, we have to build capacity. We have to invest and support technology hubs and incubators to drive innovation and entrepreneurship. The introduction and scaling of new technologies can

Innovation is also driven by growing consumer activism and a demand for sustainable products. Consumers enjoy almost infinite choices and transparency New technologies can increasingly be thanks to social networks and connectivity seen in the entire value chain. and businesses can longer compete There is an increased use of on product based differentiation only. intelligent machines for routine We will have to partner with societies tasks. One of the most recent wanting to collaborate in solving examples is mining company We have to invest and support technology challenges in housing, basic Rio Tinto’s autonomous services and infrastructure hubs and incubators in order to drive (driverless) trucks operating at through sustainable products the Nammuldi iron ore mine in and technologies. For economic innovation and entrepreneurship Western Australia. Enterprise survival, especially in the drone management platforms developing world, we will have to will start to change the game for logistics only happen if change is synchronised develop innovative financing models. and remote building operations. New with standards for materials and nonInnovation is about sustaining business manufacturing technologies are routinely traditional building technologies. growth and social and economic returns introduced to improve efficiency and the Learning and skills by identifying opportunities and quality of emissions. development in the technologies for a sustainable There is a growing appreciation for industry will be future. It requires that we not sustainable construction design with augmented by only consider the efficiency of a focus on energy efficiency, impact mobile learning operations and processes, on human well-being and physical, technologies and but also green our environmental and technological the availability supply chains and resources for new and existing buildings. of massive open find innovative New buildings are designed with integrated online courses business models to food, water, waste and energy cycles – an ( M O O C s ) develop sustainable example is the BIQ house in Germany that offered by products that meet uses a micro-algae bioreactor façade in l e a d i n g market needs. the building’s shading system to produce universities. renewable energy. Architecture is also S u c c e s s f u l responding with appropriate design and i n n o v a t i o n innovative application of concrete and will require other materials. Traditional orthogonal collaboration formwork can be replaced with fluid a n d fabric formwork to cast structures using knowledge up to 40% less concrete than an equivalent sharing. strength prismatic section, with a significantly lower embodied energy in the structure. multi-level buildings. 3-D printing will allow for mass housing delivery with individual customisation.

INNOVATION ECOSYSTEMS FOR SUSTAINABLE SOCIETIES Innovation does not happen without an ecosystem to support the process. Ideas will not be commercialised unless we develop regulatory and institutional frameworks, linking research & development with funding, and institutions with business and industries. Where the necessary

19 19

INDIA CEMENT INDIA & CEMENT CONSTRUCTION & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE JANUARY MARCH - FEBRUARY / APRIL 2016 2016

FEATURE

High-sulfur importe petcoke prices incr Indian high sulfur petcoke prices went up 5 percent, MoM. The demand for petcoke also increases, while cement demand is expected to remain strong, according to the CW Research team.

20 MARCH 20 JANUARY / APRIL- 2016 FEBRUARY INDIA 2016 CEMENT INDIA & CONSTRUCTION CEMENT & CONSTRUCTION MATERIALS MATERIALS MAGAZINE MAGAZINE

ed rease 5%+ Source: chicagomag.com

21 21

INDIA CEMENT INDIA & CONSTRUCTION CEMENT & CONSTRUCTION MATERIALS MAGAZINE MATERIALS MAGAZINE JANUARY - FEBRUARY MARCH / APRIL 2016 2016

FEATURE

March prices of high-sulfur imported petcoke increased by more than 5 percent MoM for both CFR East and West coasts of India

Mounds of petroleum coke in a storage yard

Cement demand in India is expected to remain strong for the next two months

arch prices of high-sulfur imported petcoke increased by more than 5 percent MoM for both CFR East and West coasts of India, according to CW Research’s March update of India Petcoke CFR price assessment. Meanwhile, the price of mid-sulfur imported petcoke decreased by more than 2 percent MoM on both coasts. The monthly update sees the average cost of burning high sulfur petcoke on per unit of calorific value basis at a discount of 39 percent as compared to $1.25 per ton of Richards Bay coal for West Coast. “Demand for high sulfur petcoke from Indian buyers is very strong at the moment. However, since USGC refiners are not willing to sell at lower FOB prices,

MARCH / APRIL 2016

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

many Indian buyers are looking for better offers, and are ready to wait rather than buy at current high prices”, says Sushmita Rai, Sr. Associate Analyst, CW Group. According to CW Research analysts, cement demand in India is expected to remain strong for the next two months. Currently, cement plants in India are operating at utilization rate of about 65-75 percent, thereby increasing the demand for petcoke in the country. Notably, petcoke imports by cement companies accounted for 61.0 percent of the total petcoke volume imported by India in the month of February, as compared to 84.0 percent registered in January. The CW Research team sees a 6.0 percent decrease in freight rates for bulk shipments as compared to last month.

ABOUT THE REPORT India Petcoke CFR is CW Research’s bi-monthly price assessment and monthly price index for India uncalcined petcoke. The updates cover two key price markers: India East Coast and India West Coast, providing prompt, end-user centric CFR prices for high and medium sulfur grades. Drawing on its deep expertise in the petcoke sector and other industrial segments, CW Research takes an end-user centric approach to understand pricing and underlying drivers. The report is part of India Petcoke CFR Price Assessments that complement other CW Research’s other price assessment product series providing regional insights for end-user centric pricing information for gray cement and clinker.

The CW Research team sees a 6.0 percent decrease in freight rates for bulk shipments ABOUT CW RESEARCH CW Research is a leader in syndicated and data-driven market research solutions. The company offers independent perspectives on multiple industrial market segments (e.g., Cement, metals & minerals, and specialty chemicals) and deep functional expertise in market intelligence, sourcing intelligence, commodity pricing intelligence.

CW Research also provides custom industry and competitive research programs for operating companies, financial analysts, consultants, governments, suppliers and many others as well as tailored studies together with CW Advisory. Our team operates in the USA, India, Brazil, Portugal and Romania. For more information: research.cwgrp.com

For those interested in CW Research’s “Price Assessment: India Petcoke CFR”, please contact the sales team at sales@ cwgrp.com or +1-702-866-9474. For more information: http://www.cwgrp. com/research-a-analysis/global-monitor-reports/306140-price-assessment-india-petcoke-cfr-.html

Calcined petroleum coke Source: metso.com

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

CEMENT MARKETS

CW Research

CEMENT VOLUMES 2016. The exported volume of cement produced by Japanese companies has performed well in February 2016 due to competitive pricing in international markets.

In Brazil, demand for cement continues to decline. After having fallen by 22.1 percent year-on-year in January, consumption volumes fell further in February 2016, posting a 7.0 percent year-on-year decline to 4.9 million tons. Demand levels are expected to fall further this year as the current economic scenario is taking its toll on construction activity in the country.

In France, the 8.5 percent year-on-year increase has brought volumes in the first two months of the year to 4.0 percent above last year’s, with cement consumption over the period reaching 2.5 million tons.

In Japan, demand volumes have registered a 3.8 percent year-on-year decline to 3.4 million tons. On the other hand, production volumes have decline at a slower rate, posting a 0.5 percent year-on-year fall to 4.8 million tons in February February 2016 cement demand – YoY change (%) 70%

On the other hand, France and Spain are seeing sustained recovery in demand levels. While Spanish cement consumption rose by 10.0 percent in February, volumes are far from peak levels from before the economic crisis which halved cement consumption. In February 2016, 0.9 million tons of cement were sold in the local market, 19.3 percent more than in the previous month.

In Pakistan, local cement consumption is increasing, supported by large construction projects. Demand levels touched 3.0 million tons in February 2016, 29.8 percent more on a yearon-year basis. Meanwhile, exports of cement have posted a shy year-on-year recovery in 2016 at +1.5 percent and are expected to increase in March 2016 as well. February 2016 cement production – YoY change (%) 30%

50%

Source: CW Research

To learn more, please contact the CW Research team at sales@cwgrp.com or +1-702-866-9474

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Cyprus

Ukraine

India

Vietnam

Colombia

Saudi Arabia

Peru

Thailand

Italy

Japan

China

Russia

Cyprus

Chile

Source: CW Research

Pakistan

Spain

France

Colombia

Thailand

Indonesia

Morocco

Peru

Saudi Arabia

Brazil

-30%

Japan

-10% Ecuador

-10%

Argentina

10%

Argentina

10%

30%

Belarus

In France, the 8.5 percent year-onyear increase has brought volumes in the first two months of the year to 4.0 percent above last year’s, with cement consumption over the period reaching 2.5 million tons.

Cement demand in Argentina has declined in February 2016, falling by 9.9 percent yearon-year to 0.8 million tons as compared to 0.9 million tons posted in the same month last year. This decline has brought year-to-date volumes in terms of cement demand to 1.7 million tons, down 9.3 percent as compared to the same period last year. Furthermore, cement production has contracted, falling by 11.0 percent year-on-year to 0.8 million tons. While the first half of the year is projected to bring about a sustained decline in consumption driven by decrease in construction activity, cement manufacturers in Argentina expect demand to pick up later this year.

CW Research

CEMENT PRODUCTION (million tons) Country

MoM (%)

CEMENT CONSUMPTION (million tons) YoY (%)

YTD

YTD (%)

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT PRODUCTION MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

YTD (%)

CEMENT CONSUMPTION MOM (%)

CEMENT EXPORTS (million tons) Country

CEMENT MARKETS

Volume variation analysis for selected countries that are major consumers, producer, importers and exporters of cement. This is a selection of notable markets. Additional detail is available from CW Research as well as on-line at http://www.cemweek.com to the market data section.

CEMENT IMPORTS (million tons) MoM (%)

YoY (%)

YTD

YTD (%)

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT EXPORTS MOM (%)

YTD (%)

CEMENT IMPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

Source: CW Group analysis estimates MoM: month vs previous month; YoY: month vs same month last year; YTD: year-to-date; YTD%: year-to-date vs previous year

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MARCH / APRIL 2016

CEMENT ENERGY MARKETS

CW Research

ENERGY PRICES UPDATE to March 2015’s price of $65.63 per ton. It increased slightly by 3 percent as compared to February 2016’s price of $52.02 per ton.

COAL: The average coal price for March 2016 closed at $ 53.70 per ton, falling 18 percent YoY as compared STEAM COAL FOB AVERAGE PRICES (US$/TON) US exported

Colombia exported

Australia Newcastle

Indonesian HBA

South Africa Richards Bay

120 110 100 90 80

Global trading volumes for six major coal countries increased to 83.25 million tons in December 2015, rising 7.6 percent in comparison with 77.37 million tons recorded in November 2015.

70 60 50

Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar ’12 ’12 ’12 ’12 ’12 ’13 ’13 ’13 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16

Sources: EIA, Colombia Ministry of Mines and Energy, IMF, Indonesia Ministry of Energy and Mineral Resouces

PETCOKE: US petcoke exports increased by 21.7 percent to 3.45 million tons in December 2015 as compared to the previous month, and up by 2.6 percent as compared to December 2014. The US export price for petcoke for December 2015 closed at $44.29 per ton, decreasing 10.6 percent as compared to November’s price of $49.53 per ton and down 33.8 percent as compared to December 2014’s price of $66.85 per ton.

COAL TRADING VOLUMES: Global trading volumes for six major coal countries increased to 83.25 million tons in December 2015, rising 7.6 percent in comparison with 77.37 million tons recorded in November 2015. An increase in coal trading volumes was seen in all the observed countries, which include Indonesia, Australia, South Africa, Russia, Colombia and the US.

STEAM COAL FOB AVERAGE PRICES (US$/TON) monthly price 90

Rolling 12-month average

D ‘15

O ‘15

N ‘15

S ‘15

A ‘15

J ‘15

M ‘15

A ‘15

M ‘15

J ‘15

F ‘15

D ‘14

N ‘14

S ‘14

O ‘14

A‘14

J ‘14

M ‘14

A ‘14

M ‘14

F ‘14

J ‘14

Source: customs data

NATURAL GAS: The US Henry Hub spot price traded at $1.73 per MMBTU in March 2016, decreasing 13 percent as compared to February 2016’s price of $1.99

per MMBTU and down 39 percent as compared to March 2015’s price of $2.83 per MMBTU. Price in Europe decreased 14 percent MoM, reaching $4.20 per MMBTU in March 2016.

To learn more, please contact the CW Research team at sales@cwgrp.com or +1-702-866-9474

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Volume variation analysis for selected countries that are major importers and exporters of coal and petcoke. This is a selection of notable markets. Additional detail is available from CW Research as well as on-line at http://www.coalweek.com/ to the market data section. COAL - EXPORTS (million tons) - Dec 2015 Country

MoM (%)

PETCOKE - EXPORTS (million tons) - Dec 2015 YoY (%)

YTD

YTD %

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

YTD %

CEMENT ENERGY MARKETS

CW Research

COAL EXPORTS MOM (%) US PETCOKE EXPORTS PRICES MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

COAL - IMPORTS (million tons) - Dec 2015 Country

MoM (%)

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

PETCOKE - GLOBAL EXPORT PRICES (USD/ton) - Dec 2015 Country

COAL - GLOBAL EXPORT PRICES (USD/ton) - Mar 2016 LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. WWW.CEMWEEK.COM/SUBSCRIBE COAL EXPORT PRICES MOM (%)

MoM (%)

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE Country

WWW.CEMWEEK.COM/SUBSCRIBE

YTD %

NATURAL GAS PRICES (US$/mmBtu) - Mar 2016 Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

YTD %

NATURAL GAS PRICES MOM (%)

WWW.CEMWEEK.COM/SUBSCRIBE

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

Source: CW Group analysis estimates LM: latest month Jan 2016 except where specified; MoM: month vs previous month; YoY: month vs same month last year; YTD: year-to-date; YTD%: year-to-date vs previous year

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MARCH / APRIL 2016

CEMENT MARKET AND COMPETITION

arket and competition

INDIA: CEMENT COMPANIES IN KASHMIR RECORD SURGE IN LOSSES The units of Kashmir based companies TCI MAX Cements, Cemtac Cements, Arco Cements and Itifaq Cements are posting a total loss of 2500 to 3000 metric tons, on a daily basis. The two month long log-jam between two truckers unions in Khrew, Zaffron Truckers Union and Al Khudam Tipper-Truckers’ Union, has halted the cement production in four units in the area. “The tiff is between two truckers’ unions. One is Zaffron Truckers Union and Al Khudam Tipper-Truckers’ Union. Zaffron has 900 registered trucks and when Al Khudam began operations, they had 190 trucks. This is when the problem started over the issuance of duty slips,“ said Mushtaq Wani, President KCC&I. “If they want to make another union, it’s alright. They will issue duty slips according to their number, that is 190, and the other union which has 900 will go accordingly. But the Zaffron union says that they are an old union and they won’t allow another union. So since then the issue is pending and both the truckers and the cement units are suffering,” added Wani.

MARCH / APRIL 2016

INDIA: CEMENT INDUSTRY MOTIVATED BY THE GROWTH ORIENTED BUDGET

housing projects for flats up to 30 square meters in 4 metros, 60 square meters for other metros (period 2016 - 2019).

Indian cement industry is motivated by a growth oriented budget, focusing the Government's thrust for infrastructure development in the country for its inclusive growth. From the industry's perception the budget has been very demand oriented as it put an emphasis on two major segments of cement consumption, viz. housing and the infrastructure.

On the infrastructure front, the government emphasized road building for the 2015-16 budget with its increased outlays on highways from INR 37000 crore to about INR 85000 crores, which has further been increased to about INR 97000 crores, including INR 15000 crore through the bonds which NHAI can issue.

The Prime Minister's initiative of "Housing for All" will get a major boost with the various measures announced in the budget aimed at creating the rural demand. The budget would also boost the housing sector as it includes 100% deduction for profits to an undertaking of

INDIA: DELAYED CHAMBA CEMENT PLANT LIKELY TO BE AUCTIONED The much delayed cement plant in Chamba, India, is likely to be auctioned soon. The cement plant was allocated to JaiPrakash Associates in 2007, however, the allotment was cancelled in 2014 as the company failed to achieve various milestones specified in the contract. The company which went to court against the decision, has now agreed to withdraw all cases and has conveyed its decision to the government. Around eight companies

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

have applied for the plant and a final decision will be taken soon.

LAFARGE INDIA BEGINS SALE PROCESS OF ASSETS Lafarge India has begun the sale process this week after receiving approval from the Competition Commission of India. The company appointed Arpwood Capital and Citi as investment bankers to sell the entire India operations, which has an annual production capacity of 11 million tons.

WEAK DEMAND AND CHEAP IMPORTS THREATENS INDIA'S CEMENT Cheap imports and low demand pressured the cement sector during the third quarter of fiscal year 2016. The aggregate revenue of 18 Indian cement companies increased year-on-ear by 5.3 percent (to INR 19,300 crore) in that period, but the average realization

dropped by 1.8 percent. Indian companies are especially worried with cheap imports from Pakistan and China. There is cheap clinker coming from China and almost a ton per month of cement crossing the Wagah-Attari border with Pakistan. Meanwhile, demand growth dropped to 2.2 percent in the first nine months of fiscal year 2016, leaving up to 100 million tons of cement on deposit.

The business put on the block has generated wide interest from domestic and foreign companies. Among these are Piramal Enterprises, JSW Cement and CRH. So are global private equity investors KKR and Blackstone, say investment banking sources. "The deal is estimated to be valued around INR 10,000 crore," said an investment banker.

GOVT AMMENDS MINES AND MINERALS ACT, INDIA The new amendments to the Mines and Minerals (Development and Regulation) Act (MMDR Act) are predicted to boost several deals in the cement area, among other sectors. Until now, the MMDR Act restricted the transfer of ownership of mine rights without a public auction. This restriction has been pointed out as a major constrain in UltraTech’s proposal to buy Jaypee’s cement units (22 million tons per annum capacity) and as the motif for

INDIA: SHREE CEMENT RECORDS BETTER SALES VOLUMES India-based Shree Cement has managed to beat the industry's sales volume growth in the last quarter by a considerable margin, reports The Economic Times. The company has recorded a 23 percent volume growth in the third quarter as against the

Birla Corporation’s failure to buy Lafarge India (5 million tons per annum capacity). The new amendments will allow captive mining leases to be transferred without an auction, facilitating deals between companies and decreasing costs for those dependent of mineral supplies from these captive mines. The new MMDR Act version will also allow banks to more easily alienate captive mining leases belonging to mortgaged companies. industry volume of 8 percent. The cement company may have benefitted from its lower production costs, multi-fuel plants and captive power plants.

is enhancing its cement capacity by 1.6 MT in eastern region, where the per capita cement consumption is relatively lower in comparison with the rest of India.

There are two factors which will play a crucial role in enhancing Shree Cement's valuation. Firstly, its increasing presence in markets where demand is expected to rise. Based on its volumes, the company

This would expand the company's cement capacity to 27 million tons. Secondly, being the lowest cost cement producer, it can afford to slash prices and continue to gain market share.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

CEMENT M&A AND FINANCE

&A and finance

JP ASSOCIATES, ULTRATECH FINISHES DEAL JP Associates closed the deal with UltraTech to sell its cement assets for INR 15,900 crore. The cement assets include 17.2 million tons of existing production capacity and 4 million tons grinding unit under construction, the later will demand a further investment of INR 470 crore by UltraTech. The assets capacity is currently being used at less than 50 percent; UltraTech wishes to increase that rate to around 60 to 70 percent. The deal includes UltraTech taking over INR 11,500 crore in debts from Jaypee. The company expects to renegotiate the debts at a 9 percent rate given its better credit rating. The main creditors are the State Bank of India, the IDBI Bank and the ICICI Bank. The two companies expect to complete the deal in the next 12 to 15 months.

INDIA: ORIENTAL BANK OF COMMERCE ACCUSES OF MISMANAGEMENT OF CALCOM CEMENT India-based Oriental Bank of Commerce was accused of mismanagement and siphoning of public money at Dalmia Bharat Group’s subsidiary, Calcom Cement. The allegations have been made by the Bawri Group, which is Dalmia Bharat Group’s joint venture partner in Calcom Cement, which has a 2.1-million tons cement manufacturing unit in Assam. Dalmia Bharat owns a 76 per cent stake

MARCH / APRIL 2016

The Government of Assam is a minority strategic shareholder in Calcom Cement. Meanwhile, Oriental Bank of Commerce sent a letter to Axis Bank, seeking a meeting to discuss the allegations made by the Bawri Group. Calcom Cement owes around INR 800 crore to a consortium of lenders. Currently, the case is being reviewed in the Company Law Board (CLB) in Kolkata.

INDIA’S MINING LAWS AFFECT BIG CEMENT ACQUISITIONS

India’s Mines & Minerals (Development and Regulation) Act, 2015 is creating hurdles for big cement acquisitions. Several big acquisitions including UltraTech, Reliance Cement and the imminent sale by Lafarge, will depend on a crucial amendment to the law on transfer of mines. At the moment, the MMDR Act, does not allow the transfer

in Calcom Cement through its subsidiary Dalmia Cement Bharat. The Bawri group presented controlling stake in Calcom Cement to Dalmia Cement in November 2012, while retaining 50 per cent economic interest.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

of limestone mines to new owners of cement companies- unless the mines were granted through auctions. The companies have appealed to the government to allow the transfer of mines, and are expecting an amendment to the Act in the ongoing Budget session of Parliament. In case the amendment is not passed, the companies would have to seek alternative ways.

CRH LINKED TO LAFARGE INDIA ASSETS CRH is speculated to be in a bid to acquire Lafarge India assets. Lafarge India will start the sale of an estimated USD 1.5 billion assets in India, in this week. CRH, which last year paid EUR 6.5 billion for certain Lafarge and Holcim assets prior to their merger, is being linked with a potential bid for the Lafarge India unit. PE firms, KKR, Blackstone and two local trade players are also being touted in India as likely bidders for the business.

DALMIA BHARAT BUYS STAKE IN DALMIA CEMENT, INDIA Dalmia Bharat received green light from competition authority to acquire 15 percent of its subsidiary Dalmia Cement Bharat. The company intends to become the sole-owner of its subsidiary, acquiring

the 15 percent share that is currently owned by private equity KKR. Dalmia Bharat will pay a total of INR 1,218 in cash and shares, giving KKR 8,5 percent of its shares (7,5 million) and INR 600 crore in cash. With this deal, KKR will become the largest stakeholder in Dalmia Bharat. The Competition Commission of India already approved the deal.

INDIA'S BIRLA CORP TO FOCUS ON BRAND BUILDING India-based Birla Corp plans to focus on brand building for its cement range. A lack of brand-building activity had resulted in the company owning a marginal market share in the northern India.

The lack of a brand presence in its portfolio had motivated the company to opt for the acquisition of Lafarge cement plants in Sonadih in Chhattisgarh and Jojobera in Jharkhand for INR 5,000 crore.

The company is also in the process of restructuring its marketing team apart from rationalizing the marketing budget.

The Reliance acquisition gave Birla Corporation an advantage of INR 300400 per tons in input cost.

INDIA: PIRAMAL GROUP IN FRAY TO ACQUIRE LAFARGE INDIA ASSETS

to sell its entire Indian operations of 11 million tons per annum for an estimated USD 1.5 to USD 2 billion in the last month.

at the core of it,” said an official close to the development. “This is a long term business that is unlikely to get disrupted by change in technology,” he added.

India-based Piramal Group has joined the race to buy cement major LafargeIndia’s assets that have recently been put up for sale. The company plans to diversify its business and is likely to venture in cement market. LafargeIndia had initiated plans

Several PE firms and cement companies are already in the fray for the acquisition. “From railways to highways and roads, we are looking at several high profile projects taking off in the next 1-2 years. Cement will be the building blocks and

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

CEMENT PROJECTS AND EXPANSIONS

rojects and expansions

INDIA’S JK CEMENTS RESUMES PRODUCTION AT KARNATAKA UNIT Kanpur-based JK Cements announced that it has resumed production at its 3 million tons per annum tons capacity facility in Karnataka. The operations were temporarily halted due to caning in of the silo roof. "Production of Clinker and cement resumed with operation of the Kiln by making an alternate arrangement using two RBC belts for feeding the clinker directly to the Cement Mill," said an official form the company. The halt in production would now have an impact on supply as the company’s outlets had sufficient cement and clinker stocks. The actual loss is being assessed by the company. The cement company had recorded a 2 percent increase in standalone net profit to INR 17.09 crore in the third quarter as compared to INR 16.73 crore in the same period a year earlier.

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INDIA’S CEMENT SECTOR MAY WITNESS A MAJOR REVAMP India’s cement sector is likely to witness a major revamp in the coming months. Three cement companies, including Lafarge, Reliance Cements and Jaiprakash Associates, are planning to exit the business. While Reliance Cement is committed to exiting the cement market, Lafarge and Jaiprakash Associates are yet to finalize their move. The total capacity on the sale of these three is more than 35 million tons or around 9 percent of the total cement manufacturing capacity in the country. Other cement companies, including Ultratech Cement, ACC Cement, JSW

Cement, Dalmia Cement Bharat and Birla Corp are likely to benefit from the changing scenario. There could be several M&A activities, as other cement companies could be in the fray.

GRASIM INDUSTRIES INVESTS TO BOOST CAPACITY Grasim Industries will spend up to INR 4,000 crore expanding its capacity in the upcoming fiscal years. The company operates mainly on cement, and had a total turnover around INR 32,838 crore in the fiscal year 2014-15. The largest part of the investment, INR 3,800, will be applied on Ultratech, a cement manufacturing subsidiary from the company. Between April and December 2015, Ultratech had already invested INR 1,630 crore in expansion, upgrading and modernization of infrastructures. Grasim Industries presented good results, with a

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total income of INR 9,044 crore in the third quarter of fiscal year 2015-16, compared to INR 8,035 crore in the same period previous year, while net profit climbed from INR 334 crore to INR 650 crore.

HEIDELBERG CEMENT INDIA COMMISSIONS WASTE HEAT RECOVERY PLANT

INDIA TO INCREASE CEMENT PRODUCTION CAPACITY Indian cement companies are expected to increase their capacities during 20152018. According to Centre for Monitoring Indian Economy, an incremental capacity of 68.5 million tons per annum is slated for completion during 2015-18. The projects will involve investment of around INR 27,960 crore, which is expected to increase steadily to 474 million

tons per annum by March 2018. About 60 percent of the total upcoming capacity (40.5 million tons per annum) is expected to be completed in the ongoing financial year. Of this, a capacity of 23.8 million tons per annum has been already completed. Around 18.1 million tons per annum of capacity is expected to come up in fiscal year 2016/17 and another 9.9 million tons per annum in the following year.

HeidelbergCement India commissions waste heat recovery plant at its Narsingarh plant in Madhya Pradesh earlier in this week. The power plant will utilize the waste heat generated by the clinkerization lines at Narsingarh plant. The power plant is likely to generate approximately 12 MW of power. The power generated by the said plant will substitute equivalent grid power, thereby reducing the power cost of the company.

INDIAâ&#x20AC;&#x2122;S MAWMLUH CHERRA CEMENTS COMPLETES UPGRADING ITS PLANT LIMESTONE EXTRACTION TO BE INCREASED IN ANDHRA PRADESH, INDIA Indian cement producer Jaypee Cement is now allowed to increase limestone extraction from Andhra Pradesh, India. Maximum extraction will be expanded from 3.47 million tons per annum to 6 million tons per annum. This will cost around INR 95 crore. This increase in production at the Budhawada mine will help fulfill the demand from the cement plant located in the same village, which requires 5 million tons per annum. The approval was given after examination from the Environment Ministry, and requires the company to minimize pollution of the nearby river. Currently, Jaypee Cement has a total capacity of 27.90 million tons per annum in Indian soil.

Shillong-based Mawmluh Cheera Cements has completed upgrading its cement plant. The commercial production is expected to start in February. The company, despite facing a few difficulties, commissioned the project on January 3, 2016, however, the production is yet to be stabilized. There has been no production of cement since August 2014 due to the modernization of the Mawmluh Cheera Cements. The modernization work has been pending since 2007-08.

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MARCH / APRIL 2016

CEMENT VOLUME & PRICING

olume and pricing

NORTHERN INDIAN CEMENT SECTOR RECORDS UPWARDS TREND IN CEMENT PRICES Cement prices in northern India have picked up after staying down for several months. According to the cement dealers, producers hiked prices suddenly by INR 10-15 per bag of 50 kg in February and another INR 50-70 per bag in early March. With average cement prices in February at INR 267 per bag, a substantial uptake in prices. The cement prices in the southern region have fallen slightly, after increasing for a few months. However, the cement markets in Western and Central region continue to be subdued. Meanwhile, dealers hope that higher budgetary support in fiscal year 2017 for infrastructure and housing will have a multiplier effect on cement demand.

INDIA'S CEMENT PRICES INCREASE Big cement companies in India are likely to profit from an upcoming rise in cement prices. The prices have already increased by 6 to 11 percent in the last three months, fueled by government investment in infrastructure. The government will invest INR 221 crore in infrastructure during fiscal year 2017. The price of a 50-kilogram bag has increased by INR 20-25 in the northern regions and by INR 15 in the south and western regions; in the meantime, prices remained flat in the East. Around 60 percent of cement demand currently comes from housing

and construction activities. Cement consumption is predicted to reach 290 million tons during the fiscal year 2017, up from 253 million in fiscal year 2015. Goldman Sachs expects an increase of 9 percent during the period between fiscal year 2016-19. With an increase in demand, capacity use is likely to increase from the current 69 percent to 75.6 percent by fiscal year 2018. In the last five years, cement companiesâ&#x20AC;&#x2122; EBITDA did not growth, after increasing by 36 percent annually between fiscal years 2005-10. This is likely to change during fiscal years 2016-18 thanks to cheaper fuel, higher prices and enhance efficiency.

INDIAâ&#x20AC;&#x2122;S SAGAR CEMENTS RECORDS DROP IN DECEMBER PRODUCTION Andhra Pradesh-based Sagar Cements recorded a decline of 18 percent to 129,805 million tons in December 2015, as compared to the same period a year earlier. The sales declined by 20 percent to 104,373 million tons in December 2015, as compared to 130,452 million tons in the same period, a year earlier.

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

GOVERNMENT PUSH FOR INFRASTRUCTURE STOKES DEMAND AND INCREASES PRICES

CEMENT INDUSTRY SOARS IN INDIA DURING FEBRUARY The cement industry output increased by 13.5 percent, last February. Cement was only surpassed in growth by the fertilizing industry, which grew 16.3 percent during the same month.

Industry sources say cement makers have raised prices by Rs 40-50 per 50 kilogram bag this month and another hike of Rs 15 is expected in April. This translates into a 25-30 percent increase in prices. With the government focusing on speedy infrastructure building, sources said the demand is expected to pick up significantly in the next few months as construction activity is going up in full swing. In the Budget, Finance Minister Arun Jaitley allocated Rs 2.21 crore for infrastructure namely roads and railways during FY17â&#x20AC;&#x201D;Rs 1 lakh crore for roads and Rs 1.2 lakh crore for railways. Sources said prices are expected to rise by another Rs 15 per bag in North India in early April as government issues tenders for road projects. The recent diesel price hike may also lead to cement prices moving higher, an

industry official said. "Demand is still weak but a pick up is expected in first quarter of next fiscal," he said.

Together with natural gas, refinery products, fertilizer and electricity generation, cement helped the topeight Indian industries to reach a 15-month high of 5.7 percent.

Cement Manufacturers Association of India president Sanjay Ladiwala said "demand and volume in peak season shows there will be a cement price hike. North India is showing increased demand. South India's demand is still steady." He ruled out the notion that consolidation in the sector was behind the price rise. The total value of infrastructure tenders issued in Feb 2016 was Rs 6.57 lakh crore, up 61 per cent with road sector alone rising 84 percent.

SALES INCREASE IN PAKISTAN In the first 8 months of fiscal year 201516, Pakistan cement producers sold 20.89 million tons in Pakistan.

CEMENT PRICES STABILIZE IN CHENNAI, INDIA

Sold volumes increased year-on-year by 17.49 percent between July 2015 and February 2016. Last month, sales reached 2.981 million tons, on a year-on-year increase of 29.8 percent. There are 24 cement factories in Pakistan, with the designed capacity to produce 45.6 million tons of cement per annum.

Cement prices are stabilizing in Chennai, with one 50-kilogram bag being sold for INR 340 or more. Formerly, prices reached INR 400 per 50-kilogram bag. Prices are predicted to remain stable at current levels,

The country currently utilizes around 80 percent of that capacity. New infrastructure projects are likely to continue boosting fast growth in the sector.

at least until the next Assembly elections. The current government is not making any significant effort to tackle cement cartels, leading the construction to find alternative materials like gypsum plastering.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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CEMENT PEOPLE

eople

INDIA’S GRASIM INDUSTRIES APPOINTS NEW MANAGING DIRECTOR Mumbai-based Grasim Industries has appointed Dilip Gaur as Managing Director of the company. Dilip Gaur will join the position from April 1, 2016. He will replace KK Maheswari, who will serve as the new Managing Director of UltraTech Cements. However, he will remain on the company’s Board as a non-executive director. Dilip Gaur has held several managerial positions at several levels for 20 years prior to joining Aditya Birla’s Board as a non-executive director.

INDIA CEMENTS APPOINTS S. SRIDHARAN AS COMPANY SECRETARY India Cements has informed that consequent to the retirement of Mr. G. Balakrishnan as Senior President and Company Secretary of the company

NEW HEAD OF INDIA FOR LAFARGEHOLCIM LafargeHolcim has announced that Martin Kriegner, currently Area Manager Central Europe, will be appointed Head of India, effective as of 1 March 2016. He will be succeeding Bernard Terver, who has chosen to retire, and will report to Eric Olsen, Group CEO. Martin joined LafargeHolcim in 1990, and has already held several senior leadership positions in the Group, including CFO and CEO of Group operations in Austria, as well as Head of Lafarge India and Regional President Cement for Asia. An Austrian national, Martin has a Doctorate in Law from Vienna University, and obtained an on March 31, 2016, Mr. S. Sridharan has assumed the office of the Company Secretary. The appointment will become effective on April 01, 2016. S. Sridharan will also act as the Compliance Officer with immediate effect. Previously, S. Sridharan was company secretary with Trinetra Cement.

BURNPUR CEMENT APPOINTS SAURABH GANGULY AS BRAND AMBASSADOR Burnpur Cement Ltd announced that they signed an agreement with Saurabh Ganguly, Former Captain of Indian Cricket Team, to act as the Brand Ambassador for a period of three (3) years, effective from March 11, 2016. Under the agreement, Mr. Ganguly as the Brand Ambassador of the Company will endorse the product and brand of Burnpur Cement which may help in increase of sales of the Company.

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MBA at the University of Economics in Vienna. Bernard Terver joined the Group in 1994 and became a member of the Senior Management in 2012. He was appointed Head of India at LafargeHolcim following the merger. The Board of Directors and the Executive Committee of LafargeHolcim thanks Bernard Terver for his valuable contribution to the success of the Group over more than 20 years including the successful positioning of Ambuja Cements and ACC.

CEMENTNEWS

egional news CEMENT OUTPUT RISES IN CHINAâ&#x20AC;&#x2122;S HENAN PROVINCE

NAWALPARASI, NEPAL SET TO BECOME CEMENT HUB Several domestic and foreign companies are investing in cement production in the Nawalparasi district. The district is set to become an important hub for cement production. Up to date, investors in the region have already spent INR 65 billion in new plants. Chinese and Indian companies are among the largest foreign investors so far. Sarbottam Cement will launch new brands from its factory in the region, namely Saurav and Sarbottam 2 brands. The company produces 1,200 tons of clinker every day and itâ&#x20AC;&#x2122;s the result of an initial investment of INR 10 billion. Sarbottam will produce 1,500 tons of cement per day, the equivalent to 30,000 sacks. Hongshi Holdings Group and

Shivam Holdings Group made a joint venture to invest INR 30 billion on a cement plant near Bumkibas and Sardi. The target production of the new cement plant is set at 6,000 tons per day, which would make the plant the largest cement producer in Nepal. In the area, CG Cement already produces 1,200 tons per day on its Dumkibas plant, having invested so far INR 2 billion.

The cement production reached 13 million tons in the Henan Province, China. In 2015, total cement consumption in local reached 1 million tons. According to the Ministry of Construction, the province has nine cement production line rotary kilns with a total capacity of 13.3 million tons, two of which are in the investment phase and will be completed by 2017, when they will begin production. The province also has four cement production facilities with a capacity of about 0.4 million tons. The Henan Province has the largest cement production in the country.

PAKISTAN DISCUSSES TAX POLICY FOR CEMENT A debate is underway in Pakistan about the tax policies for cement. At a national level, Pakistani cement is taxed under the Federal Excise Act 2015. At a provincial level, Sindh, Khyber Pakhtunkhwa and Punjab all charge an additional tax under the Provincial Sales Tax laws. In the upcoming budget discussion, the government is being advised to suspend the

Federal Excise Act in those three provinces in order to end the current state of double taxation. The cement sector argues that high taxation is an incentive for tax evasion. Another complaint presented by the sector contends with disloyal competition from Iranian cement, that they accuse of flooding the Pakistani market with cheap cement, especially in the Baluchistan area.

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CEMENT NEWS IRAN MAY INVEST IN BANGLADESH’S CEMENT SECTOR

PAKISTAN CEMENT MAKERS DEMAND REMOVAL OF GAS CESS

opined that with declining fuel prices the GIDC will make domestic product uncompetitive in the export market.

Pakistan-based cement producers demanded for removal of gas infrastructure development cess (GIDC) as it has increased operating costs of the sector. The Chairman of All Pakistan Cement Manufacturers Association

Moreover, the Chairman said that the recent increase in the duty on the import of coal, from one percent to six percent, has adversely hit the local manufacturers and has drastically increased the cost of doing business.

FOREIGN COMPANIES TO INCREASE INVESTMENT IN NEPAL Cement companies investing in Nepal already announced the intention to further increase their production capacity in the country. The cement sector in Nepal was given a boost, with a large USD 1,45 billion investment coming from companies like Dangote Cement (Nigeria), Hongshi Cement, Huaxin Cement (both from China) and Reliance Cement (India). The companies will create the capacity to produce 22,000 tons per day of cement. Meanwhile, Hongshi Cement already promised to double its production capacity in a second development phase, while Huaxin plans to triple its capacity through three development phases. Dangote Cement had initially planned

to produce 3,000 tons per day, but since then doubled its approved capacity. Only Reliance Cement stocked to its initial plan of producing 7,000 tons per day. Internal demand is currently fulfilled at 80 percent, and the Cement Manufacturers’ Association of Nepal warns of the danger of reaching the saturating point, but companies are confident that the postearthquake reconstruction efforts and the projects for big infrastructures will boost the sector. The market is currently growing at the rate of 12-15 percent annually and predictions are that it will increase a further 20 percent in the next 2 years. Exports are also an option for companies operating in Nepal.

Iran is likely to invest in Bangladesh due to its business potential. "Bangladesh is a country of huge investment opportunity. We're interested to invest in cement, clinker, railway transportation, polymer, leather, shoes and chemical sectors," said Mohammad Reza Mowdoody, Iran's Minister for Industry, Mine and Trade. The Iranian delegates are interested to have a meeting with the Dhaka Chamber of Commerce and Industry (DCCI) to discuss the various investments opportunities. The President of DCCI, Hosssian Khaled requested the delegates to invest in cement, readymade garment, textile, shipbuilding, tourism, power and energy, and railway sectors.

CEMENT TRADE INCREASES BETWEEN BANGLADESH AND VIETNAM Vietnam exported USD 23.70 million worth of cement and clinker to Bangladesh during February. Compared to February 2015, exports from one country to the other increased by 47.13 percent. The two commodities accounted for 32 percent of Vietnam’s exports to Bangladesh. On the receiving end, demand is especially supported by government projects (40 percent), real estate projects (35 percent) and other construction projects (25 percent). Bangladesh is heavily dependent on cement imports, representing 1.1 percent of all cement imports in the world. Cement production in the country has been increasing in the last years by a ratio of 5 to 10 percent, but next year it expected to grow by an impressive 15 to 20 percent ratio.

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

ORDERS & EQUIPMENT HIGHLIGHTS

rders & equipment

URALMASH & SRB TIE UP TO MAKE HEAVY EQUIPMENT

HEAVY EQUIPMENT MARKET TO DOUBLE TO $4 BN IN 3 YRS: CATERPILLAR

A joint venture collaboration between Uralmash and SRB International to manufacture heavy equipment for the steel and mining sector in India will boost the ‘Make in India’ programme and raise bilateral IndiaRussia trade and investment volumes. The joint venture “Uralmash SRB India,” to be officially set up in the next few months, will be the maiden JV between Russia and India to produce heavy equipment for steel and mining projects in India.

US-based Caterpillar expects India's heavy equipment market to double to over USD 4 billion over the next three years given the pick-up in mining, but ruled out capital investment as it has already built enough capacity for the next decade. "I see the resources and the infra sector related equipment, which is the largest market here, doubling to over USD 4 billion over the next three years. The current market is around USD 2 billion or around 80,000 units per annum," Caterpillar India Managing Director Vivekanand Vanmeeganathan told PTI here today. The world's largest heavy equipment maker has been present here since the 1930s and

Eyeing growth of the steel and mining sectors in India, Uralmash plans to invest up to $6 million annually in the new JV. Founded in 1933, Uralmash is Russia’s leading supplier of plants and machinery for steel, mining, oil and gas sectors, the cement industry and the nuclear power industry. It has a long history of bilateral cooperation in these fields with India. Since the 1950s, Uralmash has supplied heavy equipment to almost all the large-scale metallurgical plants in India, including steel plants in Bhilai, Bokaro, Vishakhapatnam and Rourkela.

sells massive cranes, earthmovers, offroaders, gensets among others for the construction, resource, and energy and transportation segments. While the mining and construction sector has many players such as JCB, the staterun BEML, Hitachi among others, the energy and transportation sector, that needs much larger and heavier equipment, is dominated by Caterpillar. Caterpillar India has five plants and distributes products through 180 dealers via CK Birla-controlled General Motors Marketing and Tractors India.

NEW PLANT IN INDIA TO BE EQUIPPED BY GEBR. PFEIFFER Emami Cement is installing a new cement plant in Chhattisgarh, with Gebr. Pfeiffer supplying. Emami Cement ordered a new MVR 6000 C-6 mill to be installed in the new plant. The mill has a capacity of 335 tons per hour and consumes 6700 kW. The grinding plant will support production of fly ash cement and granulated blast-furnace slag to be ground to a fineness of 3800 cm²/g and 4000 cm²/g acc. to Blaine respectively. The new mill has 2 redundant rollers, allowing

4 rollers to continue production in case of maintenance is needed. Gebr Pfeiffer SE will supply the core components of the mills and the gear units from Europe. Its Indian subsidiary, Gebr Pfeiffer (India) Pvt Ltd, will provide components such as the housing of the mill and classifier, the steel foundation parts as well as all static and dynamic interior parts of the classifier and, in addition, supply some of the equipment required to complete the grinding plant.

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INFRASTRUCTURE & PROJECTS

nfrastructure & projects

BUDGET HAS BOOSTED INFRASTRUCTURE STATUS FOR HOUSING SECTOR The housing and construction sector has got the benefits of infrastructure status in the budget even without being formally declared so, Housing and Urban Development minister M Venkaiah Naidu said. The minister also said he was hopeful of the Real Estate Regulation Bill getting passed soon. Hailing the budget proposals, the minister said various tax concessions and relief announced would go a long way in meeting the long standing demand of the construction sector for infrastructure sector. Referring to the social media campaign by consumers and home buyers seeking early passage of real estate bill, Naidu urged all parties for early passage of the legislation, which aims at promoting confidence of consumers and credibility of real estate sector.

INDIA'S FINANCE MINISTER TAPS SUPER FUNDS FOR $33B INFRASTRUCTURE CASH Big superannuation funds are mulling $30 billion-plus of Indian infrastructure projects but are unlikely to invest unless promised big returns for spending in the risky country. India's Finance Minister Arun Jaitley, flanked by top Indian business leaders, presented a list of infrastructure investment opportunities to big Australian super funds in Melbourne. Mr Jaitley, who is one of the most powerful figures in the BJP-led Indian government, said there were "huge opportunities" for Australia's $2.3 trillion super sector in the world's fastest-growing large economy. Federation of Indian Chambers of Commerce and Industry president Harshavardhan Neotia, who was in Australia as part of a trade delegation, said that about 50 large road, rail, dam

INDIA'S INFRASTRUCTURE OUTPUT GROWTH HITS 13-MONTH HIGH IN FEB India's infrastructure output grew a 5.7 percent in February, its fastest pace in at least 13 months, mainly driven by a surge in production of cement and fertilizers, government data showed. Infrastructure accounts for nearly 38 percent of India's

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

and renewable energy projects would be revealed at the meeting. The combined value of the projects exceeds $US25 billion ($32.7 billion). They will be pitched with forecast returns of 14 to 15 per cent, with currency fluctuation risk of 3 to 5 per cent a year. Australian super funds are hunting for new sources of returns, in a market where five-year United States Treasury yields are less than 1.5 per cent and the outlook for global growth and interest rates is tepid. Still, with developed market infrastructure providing almost 10 per cent returns, the risk-to-reward ratio on the latest Indian package might struggle to attract investors. industrial output. Cement production in March 2016 was up 13.5 percent from a year earlier. Fertilizer output grew an annual 16.3 percent, the data showed.

CHINA-LED INFRASTRUCTURE BANK EYES FIRST LOANS TO INDIA

CABINET NOD TO INDIA, UAE AGREEMENT ON INFRASTRUCTURE FUND

India hopes to receive one of the first loans issued by the China-led Asian Infrastructure Investment Bank (AIIB) later this year, as it looks to raise $500 million for solar power projects from the newly created lender, Indian officials said. Funding for clean energy projects would allay fears of environmental lobbyists that the bank's relaxed lending criteria could promote dirty fuels like coal in developing economies, like India, that are in a hurry to ramp up energy output.

The union cabinet has approved the Memorandum of Understanding (MoU) between India and the UAE signed on February 11, 2016, to mobilize long-term investment into the National Investment and Infrastructure Fund (NIIF).

The multilateral investment bank, which has authorized capital of $100 billion, plans to join global clean-energy initiatives, and could fund eco-friendly investment projects to avoid allegations of promoting pollution. India, the bank's second biggest shareholder after China, is looking to borrow from

the AIIB, a senior official said, to back Prime Minister Narendra Modi's plan of expanding installed solar capacity to 100 gigawatts by 2022. "In about six months, funds could start flowing from AIIB," Tarun Kapur, joint secretary at the Ministry of New and Renewable Energy, told Reuters. Interest on the loan is likely to be 2-2.5 percent and would be linked to LIBOR a floating benchmark based on the rate at which commercial banks lend to each other - for a term of over 15 years. The AIIB, which is headquartered in Beijing and was launched in January, did not comment directly on borrowing by India but said it was developing a project pipeline in a number of countries.

INDIA PLANS TO INVEST $120 BN IN AIRPORT INFRASTRUCTURE India plans to invest over $120 billion in the development of airport infrastructure and aviation navigation services over the next decade with the civil aviation sector poised for fast growth, said President Pranab Mukherjee. Inaugurating India Aviation 2016, he said the sector is poised for a faster and sustainable growth with the development of 100 smart cities; new economic corridors; more than 50 new airports and expansion of existing airports. "The deeper air penetration to smaller cities; better connectivity to northeastern part of India; higher disposable income of Indian middle class is expected to further propel the growth of Indian civil aviation industry," he said. Mukherjee noted that India registered a growth of 14 percent in civil aviation sector during the last decade.

With foreign direct investment (FDI) in air transport during the last 15 years touched the mark of $570 million, he said India continues to be a favorite destination for foreign investors in civil aviation sector. The government has allowed FDI through the automatic route to the tune of 100 percent in green field airports; helicopter services and seaplanes; maintenance and repair organizations and flying training institutes. He also pointed out that 49 percent FDI is allowed through the automatic route for domestic scheduled passenger airlines and ground handling services.

The objective of NIIF is to maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. NIIF would solicit equity participation from strategic anchor partners. The cabinet approved the creation of the National Investment and Infrastructure Fund (NIIF) in July 2015. The joint statement with the United Arab Emirates (UAE) during the visit of Prime Minister Narendra Modi to the country on August 1617, 2015, mentions the establishment of UAE-India Infrastructure Investment Fund, with the aim of reaching a target of $75 billion to support investment in India's plans for rapid expansion of next generation infrastructure, especially in railways, ports, roads, airports and industrial corridors and parks. "The MoU will help establish a transparent and high-level framework and collaboration platform under which both countries intend to explore ways to facilitate and expand the participation of UAE's investment institutions in appropriate infrastructure projects and institutions in India including NIIF, in a manner consistent with the established investment criteria and standards in a mutually agreed manner," the statement said.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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ANALYST RECOMMENDATIONS ULTRATECH CEMENT ICICIDirect analysts are bullish on UltraTech Cement, with the recommendation to buy, at a target price of Rs 3600, in its research report dated April 1, 2016. UltraTech Cement has entered into a definitive agreement for acquisition of Jaiprakash Associates’ cement assets. On March 31, 2016, the definitive agreement has been approved by the board of directors of Jaypee with certain amendments to the original deal. The transaction is subject to various regulatory approvals and amendments

ACC Gaurav Bissa of LKP Securities finds ACC to be one of the vulnerable names within the cement sector, which however shows a good looking overall picture. “If you look at the kind of prices pattern it shows and at the kind of open interest build up

Edelweiss is bullish on Coal India (CIL) and has recommended buy rating on the stock with a target price of Rs 376 in its March research report. CIL is confident of mitigating effects of the impending wage hike and increase in clean energy cess. Further, it has maintained its production target of 598mn tonnes for FY17. The company is targeting to reduce costs by 5% every year primarily through manpower cost rationalization and enhancing operating and supply chain efficiencies. As a result, Edelweiss maintains ‘BUY’. “We believe that the company would be able to maintain its margins in FY17E led by pass through of wage hikes and volume growth,” say Edelweiss analysts.

MARCH / APRIL 2016

it has seen so far around Rs 1,377-1,380, we have seen couple of occasions of profit booking generally setting in. This is what is expected this time also." For trading perspective one can initiate an ACC sell with a stop loss of Rs 1,405 and play for target of Rs 1,325, according to the LKP Securities analyst.

AMBUJA CEMENTS

COAL INDIA

in MMDR regulations. “In our view, the deal will be positive for the company considering synergy benefits, access to newer markets and reasonable valuation. Hence, we remain positive on the company and maintain our BUY recommendation,” say stock analysts. With the proposed acquisition of Jaypee, UltraTech will become the fourth largest cement player globally (in capacity terms). With this deal, UltraTech will have a presence across regions (except NE) enabling it to reap the benefits of a demand recovery led by higher government spends on infra and revival in housing demand.

Ambuja Cements is seeing some long blocks happening into the future segment, according to Amit Gupta of ICICIdirect. Historically, whenever 35 percent of correction comes in Ambuja Cements from the highs, that forms a bottom and then the stock starts moving up. The same thing happened in 2012 when it fell from Rs 220 to almost Rs 150-155. So this time it has already fallen from Rs 280 to 190. “My sense is somehow it has

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

JK CEMENT Reliance Securities is bullish on J.K.Cement and has recommended buy rating on the stock with a target price of Rs 454. J.K. Cement’s (JKC) 3QFY16 operating performance was ahead of expectation as EBITDA came in at Rs1.25bn (+28% year on year) v/s expectation of Rs1.12bn. Notably, grey cement EBITDA/tonne remained subdued and stood at Rs257 as against Rs244 in 3QFY15. “We continue to believe that possible improvement in utilizations in Southern plants and likely price recovery in Northern markets are key catalysts to improve grey cement operating performance,” say Reliance Securities analysts. Further, possible deleveraging of balance sheet from FY17E will aid it to gain further traction in profitability.

formed the bottom formation and now it is inching higher," said Amit Gupta. "It may be a good trade for expiry perspective also, so one can immediately buy the Call options. Previously, I had recommended 200 Call to buy, now 205 Call can also be bought because it has surpassed Rs 205 which was the short block in the previous sessions. So, once it has closed above that I think it may be a good short covering trade. So, you buy 205 Call which is available at Rs 5 right now. I think it may be double and possibly it can go up to Rs 12 in this series," the analyst added.

MOST POPULAR ON CEMWEEK.COM The most-read stories on CemWeek over the past two months reflects the industryâ&#x20AC;&#x2122;s mixed outlook. The India column shows the 20 most popular stories from CemWeek featuring India-related coverage, and the Global column shows the global events that gathered the most attention worldwide during this period. Visit CemWeek.com to access the full stories.

INDIA

GLOBAL

1. Cement prices go up in India

1. Cemex sells operations in Bangladesh and Thailand

2. India: Cement sector expects lower taxes in Budget 2016

2. Morocco: Anwar Invest signs contract with Thyssenkrupp

3. India: Cement prices may increase marginally

3. Algeria: Minister of Commerce signs import licenses

4. India: UltraTech's cement plants deal to be completed by June 2017

4. CW Research: Weekly Petcoke Market Update

5. CRH linked to Lafarge India assets

5. Turkey: Limak plans to set up greenfield cement plant

6. India's government confident in the cement industry

6. Denmarkâ&#x20AC;&#x2122;s FLSmidth appoints new Vice President for Process Technology

7. Weak demand and cheap imports threatens India's cement

7. Turkey cement sector has a positive outlook

8. India's government to increase spending on infrastructure

8. Messebo Cement to invest in alternative fuel, Ethiopia

9. Lafarge India begins sale process of assets

9. Mombasa Cement plans to increase production

10. India records major decline in cement realizations

10. Dangote Cement boosts profits

11. India: Cement sector witnesses a significant increase

11. Strong results from Holcim Philippines

12. India: UltraTech opens new grinding unit

12. New cement plant in Vietnam by ThaiGroup

13. India: LafargeHolcim may benefit from infrastructure spending

13. New cement plant to start operating in Venezuela

14. India: Dalmia Bharat to consolidate its activities in east India

14. Pakistan: Lucky Cement to set up waste heat recovery plant

15. India: JP Associates likely to sign cement deal with UltraTech

15. Mexico: Elementia posts Q4 quarter results

16. India: Cement companies in Kashmir record surge in losses

16. Philippines struggles with scarcity of cement

17. India: Shree Cement ramps up for expansion

17. HeidelbergCement's deal with Italcementi includes Ciments du Maroc

18. India: Cement production increases in January

18. Votorantim Cimentos plans to increase its sales

19. India: Oriental Bank of Commerce accuses of mismanagement of Calcom Cement

19. Several cement plants receive Energy Star

20. Indian cement firms may benefit from the changes in MMDR Act

20. Oman Cement to increase grinding capacity

MARCH / APRIL 2016

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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.

CONFERENCES WHERE THE CW GROUP WILL BE PRESENTING

ASHTRADE EUROPE 2016

AshTrade Europe 2016

April 21-22, 2016

Rome, Italy

Cement Business & Industry Africa 2016

June 13-14, 2016

Johannesburg South Africa

CW Group’s Cement Finance, Strategy & Trade Summit Americas 2016

October 4-5, 2016

Miami, United States

BUSINESS, LOGISTICS AND TECHNICAL COAL COMBUSTION BY-PRODUCTS MEETING

2016

ASHTRADE INDIA 2016

Cement Business & Industry India 2016

October 19-20, 2016

Mumbai, India

AshTrade India 2016

December 6, 2016

New Delhi, India

Solid Fuels Summit India 2016

December 7-8, 2016

New Delhi, India

BUSINESS, LOGISTICS AND TECHNICAL COAL COMBUSTION BY-PRODUCTS MEETING

INDIA

WEBINARS HOSTED BY CW RESEARCH

Global cement and concrete admixtures Market and Outlook

Thursday, May 12, 2016 2:00 PM GMT

FOR QUESTIONS OR INQUIRIES PLEASE CONTACT Luciana Murarasu, Marketing & Communications Coordinator at the CW Group at lm@cwgrp.com

FOR MORE INFORMATION PLEASE VISIT http://www.cwgrp.com/index.php/ research/webinars-and-meetings

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

MARCH / APRIL 2016

2016 June 13-14, 2016

Johannesburg South Africa

GLOBAL CONTACT Beatrice Ene Client Development & Marketing Director be@gmiforum.com +40 722 764 802

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