India Cement & Construction Materials (vol 1 / issue 32)

india A CemWeek Publication

issue 32

Cement

September / October 2016

& construction Materials

CW RESEARCH Lower demand affects Indian cement prices feature Optimizing energy efficiency

Q&A: Leaders

Terra Melhor, Brazil

feature Coal vs. Cement: the clash of the titans

feature The “model T� of housing

News

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Analysis

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Market Coverage

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Interviews

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People

The must-have cement and clinker

price intelligence

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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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DEPARTMENTS

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Cement makers tackle the energy optimization challenge

Cement manufacturers started to implement energy management programs to help reducing costs, while maintaining competitiveness and increasing profits.

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Coal vs. Cement: the clash of the titans

The coal industry is heavily relying on imports to meet the domestic demands, which poses significant challenges for the end-industries.

20 The future of cement: a green and sustainable sector

We discussed sustainability and environmental issues, with experts from Terra Melhor, Brazil.

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Cement & construction Materials

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EDITORIAL LETTER

Back to the future: The cement industry is heading towards a low carbon footprint, low energy consumption era

rOBERT MADEIRA

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GABRIEL BURETE

NUMBERS IN BRIEF Performance of India’s Cement Sector

cemweek publisher head of cw group research

Content Editor & Online Coordinator

Liviu Dinu

research and analytics 32 Cement Volumes 34 Cement Energy 51 ANALYST RECOMMENDATIONS

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26 Moladi – The “model T” of housing

Mr. Hennie Botes, CEO of Moladi, talks about solving the housing problem in developing countries and helping relieving poverty,

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letter from editor

Bringing the future to life In a tough, competitive industry, cement makers try to find the key to solving cost, environmental and sustainability issues.

ement manufacturers started implementing energy management programs to help reduce costs, while maintaining competitiveness and increasing profits. Among other relevant topics, India Cement and Construction Materials (ICCM) journal, issue 32, covers measures taken by producers in order to optimize energy efficiency.

Moreover, in an era dominated by environmental pressures and competitiveness, green processes and sustainability become key concepts for the cement sector.

Strong and determined actions are required for the cement industry to become sustainable, in the near future. We have discussed sustainability and environmental issues with experts from Terra Melhor, Brazil.

Around a quarter of the world’s population doesn’t own a house. Mr. Hennie Botes, CEO of Moladi, talks about solving the housing problem in developing countries and helping relieving poverty, through use of a reusable, recyclable, and lightweight plastic formwork mold.

And as usual, India Cement and Construction Materials journal 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. Don’t miss out the numbers and the trends laid out in the special sections.

India’s coal and cement sectors are both among the global top producers. The coal industry is heavily relying on imports to meet the domestic demand, which poses significant challenges for end-industries. This issue also features an analysis of the Indian coal sector and its effect on the cement industry.

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Gabriel Burete

Content Editor & Online Coordinator

numbersin brief CW Research:

Global Trade Price Report

Marginal contractions on trade pricing, yet domestic pricing spiking India is expected to see lower pricing rates in December 2016 - FOB is projected to reach around USD 50-52 per ton, marginally decreasing when compared to the FOB pricing of gray cement in June 2016. Domestically, prices have been

depicting sustained growth across the country, in spite of demand remaining sluggish. Pricing has been increasing due to the high cost of petcoke (growing by over 50% in the last couple of months).

CHART: India FOB gray cement (USD/t)

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RH: MoM % change

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Nov '15

Dec '15

Jan '16

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Import wise, India is expected to post CIF prices ranging between USD 53 and 55 per ton. Pakistan remains one of the largest exporters

Jun '16

Jul '16

Aug '16

Sep '16

Oct '16

Nov '16

Dec '16

Source: CW Research

LH: FOB price (USD/tons)

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to India. In September, Pakistan exported a total of 0.5 million tons of gray cement, much of which was accounted by Indian imports.

CHART: India CIF gray cement (USD/t)

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RH: MoM % change

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-10 Oct '15

Nov '15

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Yet Pakistan’s reliance on Indian exports to fuel growth is now being questioned, in the context of rising tensions between the

Jun '16

Jul '16

Aug '16

Sep '16

Oct '16

Nov '16

Dec '16

Source: CW Research

LH: CIF price (USD/tons)

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two countries. In the beginning of October, the leader of India’s BJP party called for a ban on cement sourced from Pakistan.

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Cement makers tackle

the energy opti challenge Cement manufacturers started to implement energy management programs to help reducing costs, while maintaining competitiveness and increasing profits.

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Source: google.com

timization

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feature ement producers are facing a time of unprecedented complexity.

Managing production while balancing supply, pricing, demand, process efficiency, compliance with regulations, and other demands turns out to be an ever tougher challenge. At the same time, the rising cost of energy, including water, air, gas, electric and steam resources, amplifies those pressures.

Cement producers have faced a significant rise in energy costs after the introduction of dry-process kilns, with a record average consumption of 100-200 kWh per ton of cement, with 40% directed to clinker grinding. Processes like grinding, transport of materials and crushing utilize machine drives and account for the majority of electricity consumption. This complex challenge, coupled with rising fuel and energy costs, has prompted cement manufacturers to implement energy management programs to help reduce costs while maintaining

competitiveness and increasing profits.

The approaches to optimizing energy consumption in cement manufacturing range from the moderate fine-tuning and improvement of processes, to the daring and innovative solutions that take a lot of testing before proving their benefits.

The holistic approach to energy optimization looks at the way energy is used during each step of the production process. The cost of purchasing the energy needed for production by an industrial facility is viewed as managed input and typically The holistic energy receives significant attention, while the approach Cement accounts for 83% of total energy use of that energy once it is inside the facuse in the production of non-metallic min- tory is often viewed as simply the cost of doing business. While not true in all inerals and 94% dustrial facilities, experience has of CO2 emisshown that unless the facility acsions worldtively manages energy use and has wide. Energy a documented plan represents for doing so, these With a log of historical data, 20% to 40% facilities are signifiof the total plant administrators can spot cantly less energy cost of cement any power quality issues efficient than they pro du c t i on . could be. Without The producperformance indicators that relate energy tion of cement clinker from limestone and consumption to production output, it is chalk by heating limestone to temperatures difficult to measure or document improveabove 950°C is the main energy consumments in energy intensity. ing process. Portland cement, the most widely used cement type, contains 95% cement clinker. Those figures clearly show that very large amounts of electricity are

september September-/october October 2015 2016

For the first time in industrial applications, the automation control, optimization, and

Source: google.com

Clinker grinding at Heidelberg Cement plant

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used for grinding the raw materials and for producing finished cement.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Source: google.com

PT Semen Padang cement grinding terminal at Dumai Clinker

information solutions necessary to con- Step one: pattern analysis cies in energy quality and consumption, quer this energy challenge are in place or After an initial assessment, the first step and to establish benchmarks for future readily available to be applied immediately toward managing energy consumption is improvement. With this big-picture view to achieve measurable results. But prior to to gain awareness of energy usage patterns of a facility’s overall use, building manbeginning any energy management pro- and trends throughout the facility. Build- agement personnel can then identify and gram, conducting an energy assessment ing management personnel can leverage make operational changes to help reduce can help companies identify energy consumption and related a wide range of changes that costs, such as shedding loads or they can make to help reduce temporarily lowering power levels consumption. These can be when the facility is approaching simple, such as a walk-through peak use.

Assessments can help establish the of a building or facility to scope of an energy savings effort, define identify quick-hit opportuniThe first step is to meter the main ties, or much more detailed incoming utilities and divide the key metrics, and put resources in place efforts. Assessments can help plant into energy allocation cenestablish the scope of an energy ters For electricity, producers savings effort, define key metrics, and put the facility’s metering infrastructure, in- could install main incoming utility meters resources in place to take a holistic view of cluding power monitoring devices, histori- on generators, plant substations, kiln(s), energy for the entire organization. cal utility bills, and prior energy or process motors over 200 hp and other major elecassessments, to collect data about all the trical consumers. Then the team will chart Recommendations resulting from the as- energy resources in relation to equipment energy consumption patterns, by measursessment may include low-investment or usage and environmental conditions. This ing and recording energy usage to identify no-investment behavioral modifications, process should include all points where en- peak demand periods, correlate consumpsuch as shifting maintenance operations to ergy is used, from an industrial process to tion with facility activities and production nonpeak times, or may be more involved, critical building systems. in real time, and forecast energy demand. such as programming changes to equipAnother part of the data gathering process ment. Evaluation and prioritization of cap- This data is then logged and time-stamped is the monitoring of power quality, in orital improvement opportunities can also be in an energy historian software program der to identify power system anomalies included in the analyses. in order to establish trends or discrepan- and calculate the cost of a power outage.

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feature With a log of historical data, plant administrators can spot any power quality issues, such as voltage drops or peaks that might damage the equipment inside the plant.

Next, cement producers can implement other control strategies like emergency load-shedding, cost allocation, and demand management to help improve energy efficiency throughout the plant.

The cost of an emergency load-shedding system can be justified by calculating what a power outage would cost in lost production, using data collected during the assessments conducted earlier. Most cement producers find that an emergency load-shedding solution will pay for itself in one or two outages. A demand management system limits energy demand through load shedding and peak shaving strategies, and thus it helps reduce demand charges and manage real-time power purchases or to minimize load during a curtailment period.

Step two: data-driven optimization

Once cement producers have addressed opportunities for improved efficiency, the next step is to examine opportunities for optimizing the entire process. Indeed, controlling a major process unit effectively usually means dealing with multivariable systems, but it is extremely unlikely that treating each control loop independently will provide optimal control, since in most situations, the control action of one loop affects the other loops.

Lafarge cement plant in KirĂĄlyegyhĂĄza, Hungary

the bill of materials allows a plant manager or production scheduling manager to make proactive production decisions and better manage energy investments in a way that will generate a greater return. For example, by knowing that certain cement batches require more natural resources, managers can move those batches outside peak windows.

Manufacturers who have adopted this holistic approach to energy management have been able to do so by leveraging existing automation and power system investments to make more of their resources.

Armed with optimized production information, manufacturers can then Most producers find an emergency project, in advance, how load-shedding solution would pay for much energy will be required for similar loads or itself in one or two power outages batches. Cement producers can then include energy requirements in resource planning and Using intelligent automation solutions to scheduling decisions in the same way they get the big picture of energy use in a ceconsider the availability of raw materials or ment plant helps to identify where operaother inputs on the bill of materials. Empir- tional changes can be made to reduce enically tying consumption requirements to ergy consumption and costs. Many cement

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producers have lowered energy costs up to 20% by adopting a holistic approach to industrial energy management. These tools help cement manufacturers eliminate operating inefficiencies, modify equipment and processes, drive energy efficiency in product design and expand plant operations to include comprehensive energy management programs that will quickly provide measurable results and remarkable cost savings.

From tuning to innovation

Besides optimizing the production process, cement producers have been looking for new technologies that might lower their energy bill. For several years now, waste heat recovery has been recognized as a cost-effective way to optimize energy consumption in cement plants. Waste-heat recovery involves capturing the excess heat of an industrial process and using it to generate electric power. China has been a leader in the field, since out of the more than 850 waste-heat recovery installations in the cement industry globally, China had 739 in 2014, followed by India with 26 and Japan with 24. Spearheaded by Japan in the ‘80s, waste heat recovery was introduced to China through a joint venture

Source: google.com

between Kawasaki Engineering Co. (Japan) and Anhui Conch (China). The technology has greatly expanded in China since 1998 in response to escalating energy costs and government policy, including tax breaks and 2011 national energy efficiency regulations, which mandated the technology’s use at newly constructed cement plants.

ings. For instance, it is estimated that a adoption of fluidized-bed systems is the full-scale fluidized-bed (3,000 tons/day) reluctance to invest in such large capital system would be as efficient as the most expenditures, as the systems have been advanced US kiln utilizing a preheater and demonstrated only at small-scale facilities. precalciner, and 37% more efficient than an average US plant. For fluidized-bed sys- Whether it is based on fine-tuning or on tems the required capital costs are about innovative approaches, the optimization of 12% lower than those of a modern cement energy consumption in the cement indusfacility and try is a must their operatfor each ining costs are dustry playabout 75% er. Pressures of a modern Cement plants can supply up to 30% from rising cement facili- of their own electricity needs through energy costs ty’s operating and environcosts, accord- the waste-heat recovery process mental reging to the US and thereby improve their bottom ulations are D ep ar t ment line by up to 10-15%. rising and of Energy. cement makHowever, in ers need to comparison with older, fully capitalized optimize in order to stay competitive. Each kiln-based plants, the fluidized bed sys- solution requires additional costs, but all tems are relatively expensive so that they cost to benefit comparisons reveal clear are likely to be considered only for future advantages to acting and investing, rather capacity expansion. Another barrier to than not spending on optimization.

A report by the World Bank Group’s private sector arm, International Finance Corporation (IFC), and the Institute for Industrial Productivity (IIP) says cement plants can supply up to 30% of their own electricity needs through the waste-heat recovery process and thereby improve their bottom line by up to 10-15%. The report analyzes 11 country-markets in five regions where the cement industry is expected to grow. It estimates $5 billion in investment could introduce about 2 gigawatts (GW) of WHR technology in developing countries.

To put that amount in perspective, 2 GW of electric power produced by waste heat recovery would be enough to power about 1.3 million to 1.5 million homes.

Cement mill in Indonesia with electronic and automation engineering from Loesche Automation

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Source: google.com

Another innovation was tested in the US, with some encouraging signs: the fluidized-bed kilns. Several large-scale fluidized-bed kiln pilots (200 tons/day) have been developed since the mid-1990s and have demonstrated significant energy sav-

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cw research:

Bright spot in the darker economic picture

In India, the growth in construction coupled with a focus on infrastructure and housing investments led to an increase in both cement volumes and demand in the first six months, while global figures are expected to follow the international economic growth slowness.

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feature At current rates, the Indian cement market seems to have legs to continue its growth cycle

he global economic growth continues trending slow, but some regions may be stabilizing. The IMF revised their October 2015 predictions, and while most regions maintain their downwards trends, the global outlook is not all grim. “India is a bright spot, it’s a complicated market, especially for cement, but at current rates, it seems to have legs to continue its growth cycle,” said Stefana Abiculesei, Consulting Analyst for CW Group.

Moreover the government is strongly pursuing its agenda for housing, which will see about 60 million units built by 2022, with about 40 million units allocated to the rural sector and 20 million to the urban sector, respectively.

Notably, the Euro Area got its first upgrade according to the IMF’s summer update, while the Middle East and North Africa region was revised upwards, when compared to the previous update. Furthermore, emerging and developing economies seem to have stabilized to some extent, the IMF only marginally revising its April 2016 forecast.

The robust growth in India is expected to lead to a sustained upside for the next couple of years

For more information and placing an order, please contact Liviu Dinu, Market Services & Marketing Consultant, CW Group (Europe), by phone at +40-744-67-44-11, or e-mail at ld@cwgrp.com.

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In this context, the general trend for cement volumes shows slowness in some emerging markets, according to figures highlighted by CW Group’s 2H2016 update to the Global Cement Volume Forecast Report (GCVFR), a twice-yearly update on projections for cement volumes on a national, regional and global level. But there are positives too, with China surprisingly recovering from the -5 percent volume contraction last year that was expected to continue, to record a low singledigit growth in 2016. Demand in China is seeing a moderate increase for now, despite a slowdown in economic growth. The U.S. market is also going through a fairly good period, outperforming expectations.

“India on the other hand, much to our surprise is showing an even stronger growth than we forecasted previously”, according to Prashant Singh, Associate Director, CW Group. The budget in early March this year announced an allocation of roughly US$250 billion to be spent over next five to six years, purely on building roads. Around 50,000 kilometers of roads are expected to be built in the mentioned period. The important detail for the cement industry is the fact that the government is stressing the fact that they would like the majority of these roads to be made of concrete.

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Additionally, there are many metro projects that are in place in major cities, and the government is aggressively funding them to ensure that at least some of them are completed before 2018-19, predominantly because the next general election is scheduled for May 2019. There is a significant indication that the government

will keep funding these projects, based on the current fiscal environment. The robust growth in 2016 is expected to lead to a sustained upside for the next couple of years.

On the flip side, a number of countries saw upwards revisions, when compared to the previous forecasts. In India, a stronger construction growth and a focus on housing and infrastructure investments led to a positive revision. Similarly, the buoyant housing market, and the promising economic outlook in Pakistan made the CW Research analysts to reconsider their previous demand expectations. China also saw a positive revision, with the evolution of the local market surprising everyone. This is predominantly due to the government stimulus in the first quarter of 2016, with the authorities stating that they are prepared to intervene again, should that be needed for a boost in the sector.

In essence, the overall picture in terms of global cement volumes has not changed dramatically. CW Research analysts continue to predict the global (ex-China) cement consumption to expand 3.8% per year on average through 2021. Per capita cement consumption is also expected to see a single digit increase in 2016-2021. Overall, the global (ex-China) market is showing growth, being predominately led by three major regions: Asia (ex-China), North America and Africa.

CW Research made major revisions on their previous forecast, which reflects a reversal of fortunes in particular cases. In the post-Brexit United Kingdom, for instance, there is a strong demand growth expected, at least for the remainder of this year, with demand for cement expected to prove resilient to the Leave vote.

Global capacity additions are expected to slow down, being primarily driven by the contraction in China. The Asian country accounts for about 56 percent of the global cement production capacity, a significant and influential portion, and with China’s efforts to eliminate outdated capacity, global numbers are said to drop over the next five years.

Much to our surprise, India is showing an even stronger growth than we forecasted previously

About the report The CW Group’s Global Cement Volume Forecast Report (GCVFR) is a twice-yearly update on projections for cement volumes on a national, regional and global level.

The forecast provides global and regional outlooks, as well as detailed perspective on 55+ of the world’s most important countries’ cement consumption, production, net-trade and cement production capacity. The five-year outlook presented in this benchmark study enables industry professionals to shape their perspective on markets and business priorities.

The Global Cement Volume Forecast Report has two updates a year: Extended (October): an extended update (includes briefs on the 55+ key markets with principal supply-demand impacting drivers and CW Research's analyst market assessments presenting a detailed numerical worldwide analysis, as well as the regional and global supply-demand model).

Quantitative update (March): a March each year quantitative update (only includes the numerical sections of the report, not country write-ups).

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The

"model t" of housing Mr. Hennie Botes, CEO of Moladi, talks about solving the housing problem in developing countries and helping relieving poverty, through use of a reusable, recyclable, and lightweight plastic formwork mold.

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Moladi is a South African company specializing in a reusable plastic formwork for use in construction of affordable housing and low cost housing projects, mainly in developing countries. The process involves creating a mold the form of the complete house. This wall mold is then filled with an aerated form of mortar. The process is faster and cheaper than traditional methods of construction.

Q: Mr. Botes, you have been building affordable houses in many developing countries. What would you say is the biggest challenge the affordable housing sector faces?

A: The real problem with affordable housing is that the infrastructure is developed for antiquated masonry technology, if I may. For example, London alone has a backlog of 70.000 units, and brick-and mortar simply does not make affordable housing. It only caters to the top third of the housing pyramid. The bottom third is not addressed. If you look at Africa, if you look at India, around 23 percent of the world’s population don’t have houses.

If you discuss the process of applying Moladi, you need to look at production line thinking. We have to eliminate waste, we have to eliminate downtime, we have to eliminate waiting time. Because we are able to cast the shell of a house in one day, our production schedule is far more predictable. Which means we can properly

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plan the assembly process and stick to this assembly schedule far easier than it is with conventional brick-and-mortar. Brick and mortar is very much dependent of the skill of the brick layer and this is when the bottleneck becomes an issue for contractors and developers.

It’s difficult to take someone who drives a horse carriage as a business and put him in a Model T. So we have to develop new Model T for housing, or a Model M, for Moladi. We are talking about creative destruction and that means that we have to challenge the old. There is a limit in what brick-and-mortar can do reduce costs, and that limit is too high.

Q: You said that the governments have begun understanding how critical housing is for the fight against poverty. You have been involved in a project with authorities from Cote d’Ivoire, lately.

Do you have any other

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similar partnerships planned, in the developing countries?

A: Our best example currently is in Tanzania. Moladi built a show unit to demonstrate to the gov the quality of the structure.

But because people are skeptical, you have to demonstrate the application. Their government told us that they had over 3000

court houses to build all over the country, in order to fight corruption.

But in addition to building the court house, they would have to also erect houses, for the staff, schools, for the children, etc., and then this effectively becomes a community center. It is vital for developing countries to prevent urbanization.

Our cities in Africa, for example, have not been developed to take another 400 million people. We have to stimulate development in order to encourage people not to leave the rural area. We have a huge slum problems, as city life encourages people to leave the rural area in search for something better.

The court houses were initially tended by conventional contractors and we came at a third of the cost. We were then appointed by the World Bank to build twelve court

houses, in order to see whether we have the capacity to do this. The President and the prime minister were recently present at the launch of our first court house, that we have completed in two months. This means that we have, in a sense, broken through the glass ceiling of being seen as a low-cost house builder. We are now seen as a building system that challenges traditional brick-and-mortar and their slow and expensive process. This is a huge breakthrough.

Q: Besides reduced costs, how would Moladi help relieving poverty? What are other benefits of building residential areas with Moladi?

A: Poverty is one of fundamental issues to challenge, in the world. The huge unem-

ployment rates (e.g. 8.9 million people out of 57 million, in South Africa alone) lead to high crime rates and other social issues, like drug abuse. With Moladi we could deskill the production process and allow entrepreneurs to form a cooperative, maybe funded by the government, as a small business. This is already a business plan that becomes profitable after building 50 houses. In turn, this becomes a huge stimulant for governments, as it creates jobs and skills, on top of addressing the backlog of houses.

There are many financial institutions that are keen on supporting entrepreneurial development , but there are no real plans and no products. There is no use for developing countries to start creating products that are only needed at the top of the pyramid, such as a Rolex or a Ferrari. We like to say that Moladi helps creating jobs for

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the unemployed, food for the hungry and shelter for the homeless.

We also like to partner with champions of the industry. We know that the development of rural villages is symbiotic with cities. When building a Moladi village, we could use the rural areas to produce food the cities, for example. This is when we go to a company that could teach people how to raise chickens, for instance, as that is not our forte. Our forte is developing the village and partnering with the right people to make the village sustainable.

We want to avoid having just a group of people sitting in new houses, unemployed.

It doesn’t mean much if we don’t stimulate the growth. There are a few basic principles that apply to all kind of businesses. So, if we manage to teach people these main pillars by using Moladi, they could apply those to any other business ventures, like

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selling school uniforms or planting tomatoes, for example. Our goal is to use a basic commodity like housing to stimulate job creation, but also to allow for other skills to develop.

Q: Surpassing the recession, the global construction market is expected to almost double in the next 15 years. Do you feel that the effects of the growth start to show in the markets you activate in?

A: Yes, very much so. When you need to stimulate the economy of a country, the best product to invest in is a house. Because once people have houses and they have an address, they have to pay taxes,

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they start consuming electricity and water, they start buying furniture and electronics, and all of these items contribute to the GDP of a country.

For the authorities, houses are vital, not only to keep the people happy, but also in order to stimulate the economy. The two go very hand in hand. Nigeria, for instance, used to rely on oil sales alone and they now need 13 billion dollars to change their economy around. We cannot be dependent on things that we do not generate.

We need to generate skills and build products. That’s one of the reasons China is so strong globally.

Q: The construction industry has been seeing an increased focus on sustainability and environmental

A: Absolutely. This is very, very vital for us. You always hear these stories and read these articles where an American, for example, would go off the grid with his home. He would invest in solar panels, heat exchanges and double glazing and he would spend probably around USD 500.000 to get his house off the grid. However, if we take into considerations all the houses in the world, what environmental impact would one house achieve really, and more importantly, how many people would afford that?

commitments. Is this part of your philosophy as well? How important are environmental considerations for Moladi?

Therefore, we at Moladi, find it very important to reduce the environmental impact with new homes, as opposed to retrofitting. When we cast a Moladi wall, our material content is local river sand and five bags of cement. A square meter of a Moladi wall drastically reduces the CO2 emissions, when compared to a square meter of a conventional wall. When you look at how much energy is used to fire the bricks and then transport them, and when you look at all the bricks that are broken in half and then thrown away, you will see that the environmental impact of conventional masonry is 52 percent higher than Moladi’s.

Q: You started as an inventor, before being an entrepreneur, therefore you understand the importance of R&D activities in innovative product development.

What investments are you planning for the nearterm in this area?

A: Honestly, I don’t have a pension fund because I rely so much on R&D in Moladi. In order to keep costs to a minimum for our end-users, we need to produce all the components, in order to assemble our Model M, on the production line, without going to the middleman, which is the hard way.

We are consistently looking at how to develop more efficient windows, how to develop roofing systems, what to do with the sewage water. And all these issues are easier to solve with 2016 technology, versus brick-and-mortar that comes back 3.500 years. This allows us to build a house faster, with a better quality and less money. In turn, this means that we are ready to address the bottom of the pyramid.

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feature

Coal vs. Cement: the clash of the titans India’s coal and cement sectors are both among the global top producers. The coal industry is heavily relying on imports to meet the domestic demands. This in turn poses significant challenges for the end-industries, such as the cement sector.

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feature

Conveyor belt empties coal into a pile

An increase in coal prices, coupled with increasing freight charges adds to the costs for the Indian cement manufacturers

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ndia is one of the largest coal producers and consumers globally. It consumes nearly 8% of the global coal production. Due to a rising demand from power and cement sectors, the domestic coal production in the country is facing ever increasing challenges to fulfill the supply-demand gap in the industry. As a result, the Indian coal industry is heavily relying on imports to meet the domestic demands. This in turn poses significant challenges for the endindustries, as the cost of imported coal are 15-20% higher when compared to the coals that are produced domestically.

Cement industry being one of the key users of coals, are facing challenges from increasing coal price. Moreover, the government’s decision to auction coal linkages for non-regulated sectors poses fresh challenges for the cement industry in the country.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Indian Coal Industry Scenario and Outlook Production and Import India’s domestic coal production during the fiscal year 2015-16 stood at 696.0 million tons, increasing from 657.3 million tons, the previous year. Domestic production in India is led by Coal India Limited, which amounted for approximately 77% of the total production in 2015-16. Domestic production’s share was 76.8% of the total coal consumption during the same fiscal year. The total import of coal was estimated at 210.0 million tons in 2015-16, slightly less than the figures for 2014-15. The increase in domestic demand was driven by a nearly 8.5% growth in production for Coal India Limited.

Coal India Limited reported production volumes of 536.0 million tons, increasing

Indigenous Coal Production vs. Import Production

2012

2013

2014

Demand in the Indian cement sector has more than doubled during the past 10 years primarily driven by growing investments in infrastructure

Import %

Import

2015

2016

Source: EIA, Indian Coal Ministry & CW Analysis

from 494.4 million tons in 2014-2015. The results were 14 million tons short from its initial target of 550.0 million tons during the beginning of the fiscal year.

End Usage of Coal – Share of Cement Industry The power industry is the largest coal consumer in India, followed by the steel and

Domestic Production by Public and Private Sector Fiscal Year

Public production: Coal India, Ltd

Other public production

Private sector production

Total Production

2011-12 2012-13 2013-14 2014-15 2015-16 Source: EIA, Indian Coal Ministry & CW Analysis

Price Trends Coal India Limited announced a hike in coal prices in June 2016. The board of directors of the company informed of a 6.3% increase in prices per ton. Coal prices in India already started to grow following the announcement of a clean environment cess of INR 400 per ton in the Union budget. Moreover, Indian Railways also announced a hike in short distance coal freight by at least 8-14% in August 2016. Furthermore the railroad company also informed that they would also levy coal terminal surcharge at Rs 55 a ton for loading and unloading, for distances beyond 100 km. Such an increase in coal prices, coupled with increasing freight charges adds to the cost of the Indian cement manufacturers

cement sectors. In 2015-2016, the cement industry amounted for more than 4.6% of the total coal consumption in India.

Demand in the Indian cement sector has more than doubled during the past 10 years primarily driven by a rapid increase in domestic cement consumption, due to growing investments in infrastructure.

Impact on the cement Industry Low domestic coal production impacts the cost of production An adequate supply of proper quality coal at a competitive price is of paramount importance to the Indian cement industry. A number of Indian cement manufacturing companies face increasing challenges, due

to higher price of coals, mostly driven by shortfall in domestic production. Currently, domestic production only meets about 50-55% of the raw materials demand for cement production in India. During the previous two fiscal years, coal prices in India grew by 8-10% due to the shortage of domestic supply. This in turn resulted in squeezing profit margin for a number of cement companies in the recent past.

Moreover, the lack of infrastructure at ports, and the less than adequate railway network add to the logistics issues for the cement makers. Cement manufacturing companies with units far from coastal areas or port cities do not prefer using imported coal due to frequent delays in supply of raw materials generated by railroad issues. Furthermore, the problematic infrastructure in fact increases the cost of transportation for the cement producers.

Coal Linkage Auction and implications for the cement industry In September 2014, the Supreme Court of India declared all the coal block auctions that were conducted since 1993 as illegal.

Subsequently, in March 2015, India’s Parliament passed the Coal Mines ions Bill.

According to the law, coal blocks will now only be allocated through auctions, in order to ensure the transparency of allocation and secure large revenue streams to the states. Players from non-regulated sectors, including cement, opposed the Cen-

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feature ter’s decision to move towards the Supplier Controlled Ascending Market Clearing Auction methodology. According to Confederation of Indian Industry (CII), coal should be allocated across different end use sectors and consumers based on demand supply gap and transportation availability.

CII also stated that the proposed methodology for coal auctions might lead to prices instability, as Coal India is the only major supplier in the country.

Further, the Cement Manufacturers Association stated that the present auction system should only be implemented after infrastructure investments, such as port and railway developments, as to ensure a smoother movement of coal from mines and ports. Moreover, non-regulated sectors also raised concerns over possibilities of undue advantage to the consumers in the vicinity of auction pit heads. However, the Government of India confirmed in February 2016 that coal will be only distributed through auctions to the non-regulated sectors. Coal India planned to auction approximately 24 million tons of coal for non-regulated sectors.

A total of 204 coal blocks were to be put under auction as per the Supreme Court’s verdict of September 2014. The central Government allocated the mines under three schedules.

A worker sprays water over piles of coal at Mundra Port Coal Terminal

In June 2016, Coal India started its latest coal auction for cement industry. Ultratech cement won two coal linkages in the auction. Kolkata-based Shree Cement also won a coal linkage auction for its Chhattisgarh plant.

What does it mean to cement players?

According to the analysts and consultants across the globe, coal auctions bring more challenges than opportunities for the cement sector in India. Coal India decided to auction only 24 million tons

Coal Consumption by Sector, 2015

Currently, domestic production only meets about 50-55% of the raw materials demand for cement production in India

Electricity

Steel

Source: EIA, Indian Coal Ministry & CW Analysis

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Cement

Others

Coal Block Auction Under Schedule II and III (Until September 2015) Schedule

Coal Mine

Award price (INR/tonne)

Location

Awardee

Schedule II

Bicharpur

Madhya Pradesh

Ultratech Cement Limited

Schedule II

Sial Ghoghri

Madhya Pradesh

Reliance Cement Company Private Limited

Schedule II

Mandla North

Madhya Pradesh

Jaiprakash Associates Limited

Schedule III

Mandla South

Madhya Pradesh

Jaypee Cement Corporation Ltd

Schedule III

Gare Palma IV/8

Chhattisgarh

Ambuja Cements Ltd

Schedule III

Majra

Maharashtra

Jaypee Cement Corporation Ltd

Source: Indian Ministry of Coal

Conclusion

of coal which is far below the demand of nearly 50 million tons. This means that domestic coal is becoming more expensive, which leads to a reduction in price differential between linkage coal and imported coal. Companies such as ACC Limited that had maximum exposure to the linkage coal, is expected to lose out due to the auction of coal blocks. Shree cement is expected to be the maximum gainer from the auction system as it already secured its first exposure to coal linkages from Coal India by winning the auction for its Chhattisgarh plant.

The Indian cement industry is heavily dependent on coal for production. The limited production of coal and the newly introduced coal auctioning system has posed new challenges for the cement manufacturers in the county. Domestic production only meets around 50% of the coal demand in the cement industry. India, being an emerging economy, requires an ever increasing domestic production of cements to deal with the rising demand, driven by multiple government initiatives to improve infrastructure.

Currently, the cement companies in India are accessing domestic coals at a much higher price due to the recent regulations.

Moreover, inadequate railroad and port infrastructure poses additional challenges for companies dependent on imported coal. As a result petcoke is increasingly being adopted as one of the alternatives to thermal coke. Companies such as UltraTech and ShreeCement are already using petcoke for cement production. In the past three years, petcoke prices have fallen by nearly 60% in India.

Coal auctions bring more challenges than opportunities for the Indian cement sector India is one of the largest coal producers and consumers globally

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feature

a green and sustainable

sector

In an era dominated by environmental pressures and competitiveness, green and sustainability become key concepts for the cement sector. Strong and determined actions are required for the cement industry to become sustainable, in the near future. We have discussed sustainability and environmental issues, with experts from Terra Melhor, Brazil.

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feature Q: The cement industry has been seeing an increased focus on sustainability and environmental commitments. What challenges does green cement encounter in the Brazilian market?

A:

The rules established by Solid Waste National Policy, published in 2010, put an end to the duality of the old collection-final disposal system. Certain obligations that require a greater technical complexity and mainly the introduction of technology in the industry, ensure an increased use of waste, applying them in an economic cycle and preventing the saturation in the uptake of natural resources.

The legal standard also contains important tools necessary to allow the country

door for this to be explored, but as mentioned technological, capacity and local regulatory challenges remain to be overcome.

Therefore the main challenge is to build the capacity to integrate a sustainable waste management system into a reliable production system within an environmental friendly legal frame.

Q: Strong and determined actions are required for the cement industry to become sustainable, in the near future. What would motivate cement producers to undergo drastic changes, towards a greener future?

A:

The cement industry works in long term perspectives, which means it can only adapt at the same speed. Building the future also means investing the earnings made today. Currently, the market is weak and the industry is seeing large production over-capacities and uncertain economic developments the world over,

Christiane Dias Pereira

Civil engineer and lawyer, specializing in environmental law, Ms. Pereira acts as a doctoral student and coordinator of the Technical University of Braunschweig (TUBS) in Brazil and as president of the CREED Institute. She also teaches waste recovery at PUC-RIO, TUBS, EPHFs-SP and SenacJundiaĂ­. in addressing the main environmental, social and economic problems resulting from inadequate solid waste management. It promotes prevention and reduction of waste generation, and having the practice of sustainable consumption habits, as well as a set of tools to provide increased recycling, reuse of solid waste, the environmentally appropriate final disposal but also energy recovery.

In particular, the huge potential offered by transforming municipal solid waste into a refuse derived fuel needs yet to be addressed.

The federal legislation (PNRS) opens the

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September / October 2016

making it even harder to invest into future.

A possible starting point may be taxing the use of virgin resources, but this needs to be balanced against its impact on the cost of the building materials. Also it is not sure

Hubert Baier

how this kind of tax would be applied to such a ubiquitous material, such as limestone. However such taxation systems are already in place, whereas waste derived alternative fuels, are tax-free!

Cement manufacturing technology is fairly optimized and developed, thus one should not expect major technological improvements, but rather incremental ones. Still, higher energy prices would trigger investments to increase the efficiency and push the industry to seek for new technical solutions.

Geoscientist and researcher, holding a PhD in mineralogy, Mr. Baier is currently director-partner of WhiteLabel Tandem Projects (WLTP). His work experience in the field of fuels and alternative energy includes companies such as Holcim, Dyckerhoff or ThyssenKrupp.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

For sure, CO2 taxation or its perspective is making the industry move, as this tax will have a major impact on production costs.

However, it still remains an open point whether carbon capture and storage (CCS) systems are truly more sustainable, as they demand additional energy for operation and the reliability of the storage still needs to be demonstrated.

Finally, product standards, that are based on technical performance rather than composition of the product could be the source of much innovation, possibly leading to more sustainable products.

Q: Cement plants are increasingly being operated by using a basket of fossil fuels and waste derived fuels or alternative fuels, each with different carbon intensities.

Although there is an International standard for carbon intensity, this is locally and nationally tailored to

suit environmental initiatives. How would you describe the Brazilian regulations, when compared to the international standards? How would a better standardization of emission intensities help with the implementation of alternative processes?

A:

Carbon intensity of waste-derived fuels is very difficult if not impos-

fact that you are invariably dealing with a mixture of materials of variable origins, qualities and quantities when handling alternative fuels. So, local/national tailoring is perfectly reasonable.

Standardization makes some sense, carbon accounting for instance, but such a global standard would hardly affect Alternative Fuels’ acceptance. AFs are not selected based on their carbon footprint. Other

Luiz Carlos Reichenbach Sousa

A researcher, holding a PhD in chemical engineering, Mr. Sousa acts as an independent consultant. He has an extensive background in the cement industry with a waste management focus, having worked in the Holcim group for 14 years. sible to standardize, at any level local, national or global. This is simply due to the

factors such as availability, respect of technical requirements and - above all - prices

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feature

play a much more important role in determining adoption of alternative fuels.

Q: Various authorities have introduced legislation and incentives (such as CO2 taxes, quarrying and extraction tax, etc.) in order to regulate and reduce the activities of the industrial sectors most responsible for greenhouse gas emissions. However, the rate of increase in emissions continues almost unabated as a result of population growth and increased industrialization and economic activity in developing countries, notably in Latin America. What other measures do you think authorities should implement, in order to reduce environmental impact?

A:

In Brazil the public policy is still being developed to promote a low carbon economy, there is a lot in discussion but little yet implemented. The WBCSD Cement Technology Roadmap gives some additional suggestions that will support the cement industry in re-

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September / October 2016

ducing its environmental impact, some of which we've already mentioned: Promote the adoption of best available efficiency technologies for new and retrofit kilns; Encourage and facilitate increased alternative fuel use; Encourage and facilitate increased clinker substitution; Facilitate the development of carbon capture and

It is the final point that merits some attention. Often, in countries like Brazil what is lacking is knowledge about possible environmental friendly technologies and measures that are preventing their adoption and implementation. Exchange between countries, especially in the frame of a PPP can be very beneficial to overcome NIBMY and

Olga Kasper

She is a geography major, holding a Masters in Applied Geography with an emphasis on Environmental Management and Solid Waste from RWTH Aachen. Ms. Kasper currently works as Environmental Administrative Assistant at Earth Best.

storage (CCS); Ensure predictable, objective and stable CO2 constraints and energy frameworks on an international level; Enhance Research and Development (R&D) capabilities, skills, expertise and innovation; Encourage international collaboration and public-private partnerships on technology implementation.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

other barriers of this type, accelerating or even first allowing the adoption of environmental friendly technology and measures.

Q: Despite the incremental improvements in process efficiency that have been adopted by the cement industry in recent years,

OPC production is still responsible for around 6% of all manmade global carbon emissions. Do you expect a shift towards ecological building material with the endusers’ increasing awareness of the industry’s environmental impact?

A:

Whereas the cement industry is responsible for 5% of the full impact of CO2 emitted by man, we observe a situation of comfort in the Brazilian market because we have the lowest rates of CO2 emissions compared to world indexes. Thus, there is little room to further reducing these emissions, emerging the usage opportunity of alternative fuels that demonstrate the best opportunity for reduction.

The trend of urbanization is still unbroken and people need safe buildings and working infrastructure. And this can so far only be ensured with artificial stone, which is concrete. Still, the end-users will demand that the material be as environmentally friendly as possible. Cement is but a fraction of the over-all building material but it needs to be produced as

environmentally friendly as possible. All the previously mentioned measures help in this sense.

What is often forgotten however, is also that the building material's share to the

A:

At first, we need to collect all the plastics due to their omnipresence, to reduce their slow but tremendous environmental damage on land and sea, and specially to build human capacities able to fulfill the technical requirements of this new market.

Terra Melhor

Terra Melhor is an engineering company with a multidisciplinary dimension, created in order to bring new solutions and technologies for the treatment, management and disposal of municipal solid waste, to Brazil. total c-footprint of a building is small.

Energy consumption during the building's lifetime has a much more important contribution and here concrete can help owing to its properties. So end-users should also consider energy-efficiency measures in buildings and in particular in their design.

Q: What do you think are the biggest challenges that the global MSW and waste-to-energy sectors will face, in the near future?

One important challenge in the MSW area remains the lack of funding at the beginning of the chain. In many a country people are not ready or willing to pay for proper garbage disposal services. This mentality is still hindering the development of proper MSW management systems.

As a conclusion, to change traditional practices we need to open a multidisciplinary discussion integrating multiple market segments to enable the design of tools for the implementation of sustainable management of municipal solid waste.

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CEMENT MARKETS

CW Research

CEMENT VOLUMES

In Argentina, cement demand in August posted strong MoM and YoY increases, partially offsetting the YTD decline seen so far. In August, domestic cement consumption stood at 1.04 million tons, up 22.5% MoM.

In August 2016, cement demand in Cyprus increased by 50.3% YoY on weak demand levels seen last year. Despite the steep yearly increase, demand was 44.5% below the volume registered in the previous month. In August 2016, consumption in Cyprus stood at 30,652 tons. On the other hand, production volumes dropped both MoM and YoY to 30,652 tons, down 53.7% from 66,212 tons posted last year.

Lower consumption levels coupled with limited exports have driven producers to cut output.

In Pakistan, local sales of cement were on the rise in August, posting a 21.4% YoY increase to 3.03 million tons. On the other hand, Pakistani producers exported less cement in August, with year-to-date volumes more than six percent below last year’s for the same period.

While prices have seen some relief in August after three consecutive months of increases, cement prices are expected to expand in the months to come.

In Indonesia, cement consumption expanded by 11.2% to 6.0 million tons in August 2016 from 5.4 million tons in the same month last year. With the result, YTD volumes were 5.8% above January-August 2015 levels. On the other hand, cement exports by Indonesian August 2016 cement demand – YoY change (%) 60%

producers have dropped considerably so far this year, falling by 17.7% in the first eight months of the year as compared to the same period in 2015.

In Argentina, cement demand in August posted strong MoM and YoY increases, partially offsetting the YTD decline seen so far. In August, domestic cement consumption stood at 1.04 million tons, up 22.5% MoM. The result brought YTD volumes to 6.9 million tons, down 12.8% when compared to the same period last year. Until July 2016, YTD volumes had dropped by 15.5%.

In the Moroccan market, demand for cement stood at 1.37 million tons in August 2016, posting a 3.8% increase compared to the same month in 2015. YTD growth rate has improved as a result of strong demand increase in August, reaching 2.1% in January-August 2016.

On the downside, the Brazilian cement market continues to face pressure as a result of weak economic development and political uncertainty weighing down on construction activity. In August 2016, cement demand in Brazil fell 4.7% MoM and 15.2% YoY, reaching 4.93 million tons.

August 2016 cement production – YoY change (%) 20%

40% 20%

-20%

Source: CW Research

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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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Cyprus

Italy

Japan

Belarus

China

Peru

India

Argentina

Vietnam

-60%

Ukraine

Brazil

Ecuador

Spain

Peru

Japan

Morocco

Argentina

Indonesia

Pakistan

-20%

Cyprus

-40%

CW Research

CEMENT PRODUCTION (million tons) Country

LM

MoM (%)

CEMENT CONSUMPTION (million tons) YoY (%)

YTD

YTD (%)

Country

LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT PRODUCTION MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

LM

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.

CEMENT IMPORTS (million tons) MoM (%)

YoY (%)

YTD

YTD (%)

Country

LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT EXPORTS MOM (%)

YTD (%)

CEMENT IMPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

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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33

CEMENT ENERGY MARKETS

CW Research

Energy Prices Update COAL: The average coal price for August 2016 closed at $59.11 per ton, declining 1.4 percent YoY as

compared to August 2015’s price of $59.97 per ton. It increased by 4.2 percent when compared to July 2016’s price of $56.75 per ton.

Steam Coal Fob Average Prices (us$/ton) US exported

Colombia exported

Australia Newcastle

Indonesian HBA

South Africa Richards Bay

110

90

70

Global trading volumes for six major coal countries increased to 80.42 million tons in August 2016, growing by 17.1 percent in comparison with the 68.66 million tons recorded in July 2016.

50 Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug ’12 ’12 ’12 ’13 ’13 ’13 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16

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

COAL TRADING VOLUMES: Global trading volumes for six major coal countries increased to 80.42 million tons in August 2016, growing by 17.1 percent in comparison with the 68.66 million tons recorded in July 2016. An increase in coal trading volumes occurred in Indonesia, Russia, United States, Colombia, and South Africa all showed volume increases in the month of August, whereas Australia saw a volume decline.

PETCOKE: US petcoke exports decreased by 22.6 percent to 2.58 million tons in August 2016 when compared to the previous month, and down by 1.8 percent as compared to August 2015. The US export price for petcoke for August 2016 closed at $38.39 per ton declining 31.5 percent as compared to July’s price of $56.03 per ton and down 39.1 percent when compared to August 2015’s price of $63.02 per ton.

Steam Coal Fob Average Prices (us$/ton) monthly price 80 70

Rolling 12-month average

60 50 40 30 20

J ‘16

A ‘16

J ‘16

M ‘16

A ‘16

F ‘16

M ‘16

J ‘16

D ‘15

N ‘15

S ‘15

O ‘15

J ‘15

A ‘15

J ‘15

A ‘15

M ‘15

F ‘15

M ‘15

J ‘15

D ‘14

N ‘14

S ‘14

O ‘14

A‘14

10

Source: customs data

NATURAL GAS: The US Henry Hub spot price traded at $2.82 per MMBTU in August 2016, unchanged as compared to July 2016 and up 1.8 percent as

compared to August 2015’s price of $2.77 per MMBTU. Price in Europe decreased 0.9 percent MoM, reaching $4.47per MMBTU in Aug 2016.

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

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

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.

COAL - EXPORTS (million tons) - Apr 2016 Country

LM

MoM (%)

PETCOKE - EXPORTS (million tons) - Apr 2016 YoY (%)

YTD

YTD %

Country

LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

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.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

COAL - IMPORTS (million tons) Country

LM

Apr 2016

MoM (%)

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

PETCOKE - GLOBAL EXPORT PRICES (USD/ton) Country

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

MoM (%)

YoY (%)

YTD

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

MoM (%)

Apr 2016

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE Country

LM

WWW.CEMWEEK.COM/SUBSCRIBE

YTD %

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

LM

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.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

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

To learn more, please contact the CW Research team at sales@cwgrp.com or +1-702-866-9474 INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

September / October 2016

35

cement market and competition

M

arket and competition

Kashmir cement market records decline in activities Kashmir cement market has recorded a significant decline in activities, recording a loss of INR 200 crore.

The cement plants were deserted due to ongoing unrest, which affected the activities at the cement plants. “We were doing well. Our production and demand increased a lot and we were making good profit. But the unrest is hitting us badly. We have suffered a loss of nearly INR 20 crore as the factory is shut for the last three months,” said Atul Sharma, Managing Director of JK Cement. The lockdown in the region have affected the cement prices, which have skyrocketed due to shortage of production of cement. “There are two main reasons behind this: first is the increase in the ferrying charges and the second being the ongoing unrest itself.

Normally one truckload of cement would cost nearly INR 60-70,000 but the unrest has escalated it to one lakh rupees,” said Ghulam Hassan, Accounts Officer, Saifco. The ongoing unrest has also affected the number of workforce at the cement plants and higher transportation of cement from cement plants to the dealers.

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Official seeks ban on Pakistani cement imports The leader of the Bharatiya Janata Party (BJP), Subramanian Swamy, asked for a ban on cement imports from Pakistan.

As tension continue to rise between Pakistan and India, Swamy asked the Indian prime-minister Narendra Modi, also member of the BJP, to ban cement imports from Pakistan. Swamy claims that banning Pakistani imports is in the

best interest for India, for both economic and security reasons. According to him, duty-free cement imports were introduced in 2007 to accommodate rising demand. The situation has since change, and India is sitting on 116 million tons of idled capacity.

The leader of BJP also mentioned reports of heroin and fake currency smuggled inside cement bags imported from Pakistan. He worries that weapons and ammunitions can also be concealed on those bags.

Cement sales stall in August Indian cement sales slowed down to 22 million tons during August.

In the north and central regions alone, demand for cement fell between 5 to 7 percent year-on-year on the back of heavy rains and sand mining issues. Cement consumption is expected to recover by October, when the monsoon season ends.

In eastern and southern India, demand actually grew by around 5-6 percent.

Across India, prices declined month-on-

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

month by 3 percent during July and by a further 1 to 2 percent month-on-month during August.

Fly ash shortage likely to increase cement imports The shortage of fly ash is hindering the production of cement for the domestic market in India, which is likely to cause a rise in Pakistani cement imports.

Deutsche Bank expects strong year for India's cement industry Deutsche Bank predicts a good year for the Indian cement makers with a good monsoon and only slight capacity additions.

Rainfall has been moderate to normal across the country, helping raising hopes for the second half of the current fiscal year. Demand by the construction sector

Dalmia Cement invests in R&D center Dalmia Cement Bharat has setup a research and development center at Padi, Chennai.

"We believe in constantly innovating, developing quality products and improving

is expected to increase both in rural areas and in tier-2 and tier-3 cities. Roads are also an important boost for the cement sector. During the current monsoon, road building has remained strong.

Based on this scenario, Deutsche Bank predicts a 7-percent growth for the sector during the fiscal year 2017, with demand increasing by 9 percent during its second half. Capacity has remained stable, with the sole exception of eastern India, where Emani Group, ACC, Shree Cements, and UltraTech have been adding capacity.

service to achieve customer satisfaction, all with new benchamarks in quality, usability and sustainability," said Mahendra Singhi, Group CEO of Dalmia Cement Bharat. The new center will support the manufacturing, marketing and innovation initiatives of the company. The center will help to setup industry benchmarks in the region.

The fly ash supply from Indian thermal power units, used to create cement, has been insufficient to increase production in order to keep up with domestic demand.

This lack of supply has triggered a demand for Pakistani cement, with initial forecasts estimating exports to reach 1 million tons. Indian domestic production is around 280 million tons. Cement is also exempt from import duties, which makes it cheaper than domestic cement.

Indian cement producers are pushing for additional import duties on cement. Recent attacks in Kashmir, linked to Pakistani terrorists have created tension between the two countries, with only some markets, such as cement, escaping the restrictions.

Cement companies eye eastern market According to cement industry growth estimates, the Indian east shows the most signs of growth, at a 10 percent pace, compared to 5 percent in the rest of the country. Key players investing in the region include Shree Cement, Emami, Nirma, and Lafarge.

The total capacity of the region is equivalent to 17-18 percent of the total national capacity of 370 million tons per year. Some analysts predict the capacity could expand up to 600 million tons in the next ten years.

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cement M&A AND FINANCE

M

&A and finance

Birla acquisition of Reliance cement assets to be completed The Indian company Birla Corp is closing in to completing the acquisition of the entire cement business of Reliance Infrastructure.

The regulatory clearances are expected to be completed by the second of FY2016. “It is under implementation.

Some (regulatory) compliance has to be done. We are in the process of addressing these. And once this compliance issues are resolved, then the closing can happen like any other deal,” said Harsh V. Lodha, Chairman of Birla Corp.

Ambuja Cement to acquire stake in Holcim The Indian Cabinet has approved the proposal of Ambuja Cement to acquire 24 percent stake in Holcim India. The transaction is valued at around INR 3,500 crores. Additionally, these transactions would enable Lafarge Holcim group to create a linear corporate structure (with Ambuja and ACC becoming parent and subsidiary) with a view to harvest significant synergies from India operations.

in the country. In addition, it will help in debt free balance sheet and cash flow generation, bringing in huge prospects for further expansion and creation of employment opportunities.

The move is also expected to help the company to increase its market share

Ultratech to acquire Jaiprakash Cement plants

The acquisition is expected to provide the company ownership of modern plants while also increasing its total cement production capacity from 10 million tons per annum to a volume of 15.5 million tons per annum, strengthening its presence in the high growth Central region of India.

India-based UltraTech Cement is likely to complete the acquisition of JaiPrakashowned cement plans within the next year.

The acquisition is expected to increase the company’s capacity to an augmented

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volume of 91.1 million tons per annum, including its overseas operations.

Meanwhile, UltraTech Cement recorded a 29 percent increase in net profit to INR 780 crore in the first quarter of 2016 as compared to the same period a year earlier.

India Cements posts 1Q2016 results India Cements recorded a 16 percent increase in net profit to INR 44 crore in the first quarter of FY2016, as compared to INR 38 crore in the same period last year. The revenue declined by two percent to INR 1,202 crore in the first quarter of FY2017, as compared to the same period last year.

Jaiprakash Associates and Ultratech deal faces hurdles India-based Jaipraskah Associates and UltraTech deal acquisition prices has been revised after Jaiprakash’s Karnataka cement assets have been dropped from the deal.

Under the merger deal, UltraTech Cement has revised the price at which

it will buy the cement division of Jaiprakash Associates to INR 15,900 crore from INR16,500 crore. “In addition to the INR 15,900 crore, UltraTech will pay INR 470 crore on the completion of Jaiprakash’s under-construction capacities, which are part of the deal,” said an official from UltraTech Cement.

The move is expected to help UltraTech Cement to explore the South Indian cement market.

Sagar Cements to acquire a unit of Toshali Cement India-based Sagar Cements will acquire entire assets in the grinding unit of 1,81,500 tons per annum capacity in Andhara Pradesh from Toshali Cement for INR 60 crore.

by optimizing the equipment already available with the company through an infusion of funds to the extent of around INR 6 crore.

The transaction is, of course, subject to regulatory approval from authorities. The company plans to increase the capacity of the said unit to 300,000 tons per annum

The acquisition of assets will help in saving logistic costs and introducing slag cement to fulfill the demand of Visakhapatnam, Vizianagaram, Srikakulam and parts of Orissa makets.

Shree Cement posts first quarter results

tons in first quarter of FY17, as compared to the same period last year.

India-based Shree Cement recorded an increase in standalone net profit to INR 269.2 crore in the first quarter of FY17, as compared to INR 508.14 crore in the same period last year. The sales volume increased by 19 percent to 5.17 million

The cement company also recorded improvement in profitability due to higher EBITDA margin in the reported period.

The revenue increased by 51 percent in the reported period. Meanwhile, the EBITDA margin increased from 23.03 percent to 33.58 percent on a year on year basis. The EBITDA increased due to a sharp decline in power and fuel costs. Meanwhile,

Piramal Group and Nirma join the race for Lafarge India India-based Piramal Group, Nirma and JSW Cement have joined the race to acquire Lafarge’s entire India cement assets.

At leas another two companies, including Mexico's Cemex and China's Anhui Conch Cement Company, are the contenders for Lafarge's cement assets. In February 2016, LafargeHolcim had agreed to sell its 11 million tons per annum operations in India.

Shree Cement is focusing on increasing its capacities. The company also plans to setup an integrated plant with a clinker capacity of 2.4 million tons per annum and a cement grinding unit of up to 4 million ton per annum in Karnataka, while also boosting the clinker capacity of its plant at Baloda Bazar, Raipur, by 2.8 million tons per annum.

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39

cement projects and expansions

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rojects and expansions

Nagpur region to get more cement roads Nagpur region in Maharashtra, India will get more cement roads at an investment of INR 300 crore.

Two firms, Nagpur Municipal Corporation (NMC) and NIT will share expanses of INR 100 crore each. The chief minister of Maharashtra has approved the construction of cement roads. "The CM had kept his words. He had approved cement roads worth Rs 300 crore in 2015-16. Currently, same package has been okayed for 2016-17,” said Pravin Dakte, Mayor of Nagpur Municipal Corporation.

He added that “We are hopeful that he [the chief minister] will sanction more cement roads worth Rs 300 crore every year in next three years.

This will take the total expenditure on cement roads to Rs 1,500 crore during the BJP government's five year regime."

Meanwhile, the state government is expected to release its share of INR 100 crore in June. The NIT will also transfer its share of INR 100 crore to the NMC when the bills are raised.

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Ambuja Cement completes Sankrail plant expansion Ambuja Cement completed the Sankrail expansion project. The augmented Sankrail Grinding Unit was inaugurated in Howrah, West Bengal.

The plant was built originally in the year 2001 with the capacity to produce 1.2 million per annum, encompassing two ball mills and two packers. Higher demand from local projects led to its expansion in 2010, to accommodate 1.5 million tons per annum. The latest expansion increased capacity up to 2.4 million tons. The grinding unit will supply cement to the West Bengal market, and also to the states of Orissa and Jharkhand. Kriegner said that he is “sure this expansion will address the expectations of customer in the eastern markets in

India". The project cost INR 338 crore.

“With the focus on increasing our market share in the competitive market of West Bengal and increasing supply to the nearby states of Orissa & Jharkhand by optimizing the overall regional logistics cost, a capacity addition of 0.90 million tons per annum of PPC cement at Sankrail was envisaged. I am sure this will meet the demand of the eastern markets in India,” said Martin Kriegner, Head of Lafarge Holcim-India Operations and Board of Director for Ambuja Cements.

Burnpur Cement to increase capacity India-based Burnpur Cement is planning to invest around INR 500 crore to increase production capacity to 3 million tons over the next three-four years.

The current production capacity of the company is of 0.6 million tons per annum.

The cement producer has two plants, one in Asansol in West Bengal and the other in the Patratu district in Jharkhand.

Each plant has a 0.3 million tons per annum installed capacity. Meanwhile,

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

the company aims to increase its sales volumes to INR 250 crore in the next fiscal year from INR 100 crore in the last fiscal year. The cement producer plans to build 2 million tons per annum greenfield plant in West Bengal. "In addition, we plan to bag 5-6 limestone mines. We are planning to increase the capacity of our Jharkhand plant to 1 million tons per annum having raw materials reserve for minimum 50 years," said Ashok Gutgutia, vice chairman and managing director of the company.

NTPC opens ash brick unit In India, National Thermal Power Corporation Limited (NTPC) Ramagundam announced the opening of a mega ash brick unit.

Ambuja Cements concludes Sankrali project in West BengaL India-based Ambuja Cements announced the completion of its Sankrali project in West Bengal.

The project, commissioned in 2001, has a capacity of 1.2 million tons per annum. The project included two ball mills of a 92 tons per hour capacity, two packers of a 180 tons per hour capacity, and a manual wagon loading system. The plant’s production capacity has increased steadily to 1.5

million tons per annum in 2010 and with the recent upgrade the capacity has reached 2.4 million tons. “With the focus on increasing our market share in the competitive market of West Bengal and increasing supply to the nearby states of Orissa & Jharkhand by optimizing the overall regional logistics cost, a capacity addition of 0.90 million tons per annum of PPC cement at Sankrail was envisaged.

I am sure this will meet the demand of the eastern markets in India,” said Martin Kriegner, Head of Lafarge Holcim-India Operations and Board of Director for Ambuja Cements.

Executive Director Prasant Kumar Mohapatra said that this is part of the company's mission of achieving 100 percent utilization of ash of the power station, as well as meeting the requirements in the construction sector. Currently, NTPC Ramagundam utilizes 89.22 percent of ash, figures relating to the last financial year. Mr. Mohapatra said that they had utilized 87.98 per cent of ash during this financial year till date.

KCP Cement to focus on expansion India-based KCP Cement plans to invest around INR 400 crore in order to double the production capacity at the cement plant in Muktyala, Krishna district, Andhara Pradesh.

investment is a part of KCP Cement’s modernization and cost optimization program. The project is aimed at reducing costs and improving operational efficiency of the cement plant.

The planned investment will increase the plant’s production capacity from 1.86 million tons per annum to 3.52 million tons per annum. The company plans to increase production capacity by setting up a second cement production line. The

The company is currently focused on efforts to increase its market share by creating a distinctive position for itself.

The company will also be supply cement to several government proposed initiatives in Andhara Pradesh.

UltraTech Cement benefits from linkage auctions

in all, coal linkages for 409,500 tons for its plants located at Maharashtra and Chhattisgarh. Both these locations are land locked and this helps the company in mitigating the impact of rising costs of petcoke/imported coal," said an official from the company. The move is expected to have a positive impact on the company, as its cement plants are strategically located near the coal mines.

India’s UltraTech Cement has secured 4.09 lakh tons of coal linkages for cement plant in Chattisgarh and Maharashtra regions.

The company also plans to participate in the future coal linkage auctions. "With these auctions, the company has secured

Dalmia Cement receives certification Dalmia Cement secured a Green Pro certification by the CII. The company is the first Indian cement manufacturer to receive the prestigious certification.

Mahendra Singhi, the group’s CEO, has already expressed its satisfaction with the recognition.

The certification was awarded for Dalmia’s Pozolana Cement. The company emits an average of 530 kilograms of CO2 per ton of cement produced, compared to the global average of 660 kilograms and to the Indian average of 586 kilograms of CO2/ per cement ton. Last year, the company produced a volume of 24 million tons of cement.

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cement volume & pricing

V

olume and pricing

Cement prices increased anew Indian cement companies announced a price hike in cement, anticipating higher cement in the market.

The cement price hike is seasonal and also impacted by steep surge in petcoke prices in the market. Meanwhile, petcoke prices have increased by around 80 percent over the last six months, which is likely to impact margins in a seasonally weak period. “Companies have announced price hikes of INR 10-50 per bag across most regions in September 2016 mainly on reversal of price fall during monsoon,� mentioned a market report.

The cement prices have increased in western, eastern and southern parts of India, while prices in central and northern India are stable.

In addition, several companies are likely to replenish petcoke stocks at higher prices, which is expected to affect the final costs for the customers.

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Cement output slows down during August The Indian cement sector produced 22 million tons of cement during August.

Cement production was affected by heavy rains, especially in the north and central regions, where cement production fell by 5 to 7 percent year-on-year. In the mean time, cement output continues to increase in

the eastern and southern regions, where it grew by 6 percent. Cement production and demand is expected to improve in October, as construction activities are resumed after the monsoon. In the mean time, prices have come up by 1 to 2 percent month-onmonth in August, an estimated increase of 3 percent in July. Petcoke prices, which have already increased by 80 percent during the past six months, are likely to impact the margins of cement manufacturers.

South India records a hike in cement prices Vishakhapatnam recorded a hike in cement prices from INR 300 per bag in fifteen days ago, to INR 380 per bag this week.

The realty builders opine that the hike in cement price is due to artificial scarcity created by vested interests. The officials need to interfere and implement measures to avoid the sudden price hike in cement.

"The recent order by The Competition Commission of India imposing more than Rs 6,700 crore penalty on 11 cement companies for cartelisation is as big a fraud

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

as any in the recent past. The Builders Association of India filed a case against the Cement Manufacturers of India (CMA) way back in 2010,� said AV Monish Row, President of Vizagapatam Chamber of Commerce and Industry.

The president further explained that the cement cartel are known for fixing the prices or controlling production to keep prices high. The commodity is key to growth of economy and needs to be free of cartel led pricing.

India imports more coal from South Africa, 1QFY2016 Indian imports of South African coal soared by 56.78 percent year-on-year during the April-June quarter of 2016.

Electricity tariffs to increase in spite of increase coal stockpiles Indian utilities are paying more for their coal supply in spite of rising stockpiles.

The combined effect of an increase in railways freight rates by Indian railways and in the Clean Energy Cess by the Union government led to an increase in fuel costs that may result in a 25-percent increase in electricity tariffs according

to some companies. Freight rates were increased between 8 and 15 percent for trips between 200 and 700 kilometers. In the mean time, the Clean Energy Cess was doubled from INR 200 to INR 400 per ton.

These two combined factors the potential decrease in costs due to the current situation of supply abundance.

During April-August, Coal India registered an increase in coal sales of 1.3 percent. Power plants are now carrying an inventory of 48 million tons.

India records higher cement output The Indian cement market recorded a three percent increase in the output in August 2016, as compared to one percent increase in the same period last year.

The surge in cement production had a positive impact on the infrastructure

sector in India. The infrastructure output increased by three percent in August, mainly due to an uptake in production of fertilizers and cement.

In the first five months of the current fiscal year to August, the output growth increased by 4.5 percent.

Cement market expects higher demand and prices The Indian cement market demand is expected to increase by six percent in first quarter of FY2016, as compared to 4.6 percent in the same period last year.

The rising demand is expected to be supported by increase in cement prices in the near term. Meanwhile, an increase in infrastructure segments and recovery in the rural demand from the second half of the current financial year, given the better monsoons is expected to have a positive impact on the sector. "While the government’s emphasis on the

infrastructure projects is likely to result in increased public sector investments, revival of the public private partnership (PPP) is critical to improve the pace of infrastructure development," said Sabyasachi Majumdar, senior vice president, ICRA Ratings.

Meanwhile, cement production registered a growth of four percent during AprilJuly 2016, as compared to the same period last year. The cement sector is expected to benefit from energy cost savings and recent increase in the coal and petcoke prices.

India imported 9.3 million tons of coal from South Africa during that quarter, compared to 5.9 million tons during the same quarter in 2015. For the same periods, Indonesian imports increased slightly by 0.85 percent, from 23.2 million to 23.4 million tons, while Australian imports went up from 124,000 to 687,000 tons.

Cement companies use a mixture of coal and petcoke. Indian cement makers are demanding higher quality coal as petcoke prices increase. South African coal is being favored for its average calorific value of 5,5006,000 kcal per kilogram compared to Indonesian coal with more impurities and an average calorific value of 4,0004,500 kcal per kilogram.

Indian cement companies record higher market capitalization Indian cement companies have a market capitalization of around USD 52.2 billion, which is more that Chinese cement market capitalization of USD 48.3 billion.

In the last few months, UltraTech Cement has become the world’s fifth most valuable cement maker, amongst other bigger players including Cemex, Anhui Conch and Italcementi. Meanwhile, Indian cement makers are valued at 48 times their net profit in the last financial year on average, nearly double the corresponding valuation ratio of Chinese firms. The market analysis reveals that the Indian cement companies are yet to catch up with the western and Chinese companies in terms of revenue.

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43

cement PEOPLE

P

eople

JSW Cement appoints new managing director JSW Cement has appointed Parth Jindal has been appointed as Managing Director of JSW Cement.

Mr. Parth Jindal will be assisted

by Anil Kumar Pillai as CEO. Mr. Parth has shown a keen interest in growing the cement business and was instrumental in convincing the group to invest INR 800 crore in the grinding unit at the site where the work on a 10-million tons integrated steel plant with an investment of INR 35,000 crore was stopped due to a delay in allocation of raw material linkages.

Zuari Cement gets new MD as part of Italcementi acquisition Jamshed Naval Cooper, formerly CEO and managing director of HeidelbergCement India Ltd (HCIL), is to become managing director of Zuari Cement and managing director of HCIL. Mr Cooper, who previously worked for ACC before joining HCIL in 2006, will now be responsible for managing the affairs of both companies. Zuari Cement

is an Italcementi subsidiary and the appointment of an HCIL executive as managing director reflects the changes brought about by HeidelbergCement’s acquisition of its parent. Zuari Cement is one of the leading cement producers in South India. A fully owned subsidiary of the Italcementi Group, the company has grown from a 0.5 million ton capacity in 1995 to above 6MnT in 2013. Zuari entered the Cement business to operate the Texmaco Cement Plant in 1994. The company became a 100% subsidiary of Italcementi Group in 2006.

India’s Grasim Industries appoints new Managing Director Mumbai-based Grasim Industries has appointed Dilip Gaur as Managing Director of the company.

Dilip Gaur took the position on April 1, 2016, replacing KK Maheswari. Mr. Maheswari took charge of a new position,

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as Managing Director of UltraTech Cement. 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.

cementnews

R

egional news

Nepal: Bhairahawa’s expansion rests on new power lines

Semen Indonesia posts increase in cement exports

Nepal’s Bhairahawa cement hub’s expansion plans are dependent on the installation of new power lines.

Semen Indonesia recorded a 187 percent increase in cement exports to 86.8 million tons in August, 2016, as compared to the same period last year.

Several cement plants in the region have halted production due to a crippling power crisis in the country as the plants are unable to utilize their installed capacity. As Bhairahawa lies near the ancient site of Lumbini, government policy bans the operation of factories within a 15 km radius of the holy site. Meanwhile, the several cement companies have stalled their expansion plans as the environmental rules do not permit the expansion.

However, the region is expected to get a power transmission line of 132 KVA and an additional 200 MW will be transmitted to the Lumbini Industrial Corridor in the near future. The new power lines are expected to minimize the power issues in the region.

The cement exports rose by 4.1 percent to 360.4 million in August, 2016, as compared to the same period last year.

The cement exports increase amidst oversupply of cement in the domestic market. "The August contract has been no new countries, but rising demand from Bangladesh, the Philippines, Timor Leste, and Brunei Darussalam," said an official from the company.

Semen Indonesia expects the cement demand to increase in the next few months and increase the scope of export markets. The company plans to increase cement exports to Taiwan.

Pakistan: Prices of cement to increase in the next months Pakistani cement producers will increase the cost of a 50-kilogram bag by PKR 36 per unit.

The increase will be gradual, and it will begin by a PKR 15 per bag raise during the month of November. Manufacturers justify this decision pointing to higher coal prices in the international market.

Pakistani producers use coal as their main fuel for cement kilns. Thermal coal was negotiating at USD 90.95

last Monday, October 17. Pakistan’s government recently decided to rise the duty on imported coal from five to eleven percent, further increasing fuel costs.

The All-Pakistan Cement Manufacturers Association is protesting the fact that coal is one of the few fuel sources that is subject to an import duty. The cement industry consumes around 95 percent of the 4.5 million tons of coal imported each year by Pakistan.

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cement news Pakistan records uptake in cement consumption

Indonesia faces cement oversupply The Indonesian cement market is struggling to absorb the additional installed capacity.

The Indonesia Cement Association says that cement capacity production will reach 90 million tons, 11 million tons more than in 2015. During the last

year, four new cement plants entered operation in the country. The association is advising the Ministry of Industry against permiting the construction of new cement plants. At the same time, demand showed a sluggish increase of 3 million ton. Due to overcapacity, stockpiles are increasing. Even in this scenario, capacity is expected to continue increasing and reach 100 million tons in 2017.

Nepal: Local cement companies to expand operations Nepal-based cement companies have begun to expand their activities in a bid to capture major market share.

The proposed entry of foreign cement companies has led to capacity expansion activities amongst the local cement companies. Several cement companies including Dangote Cement, Hongshi and Huaxin Cement and Reliance cement have received approval for investment of around USD 1.45 billion together and proposed output of around 22,000 tons daily. “Almost all the local factories were on an expansion drive currently, and

that one of the reasons behind the move was to benefit from economies of scale and be competitive amid the massive foreign investment in the sector,� said Dhruba Thapa, President of Cement Manufacturers Association of Nepal.

However, the local cement producers claim that they fulfill 80 percent of the demand of the country’s requirement with a capacity utilization of 50-60 percent.

On the other hand, the foreign players claim that unexplored potential demand for cement in Nepal as infrastructure development is anticipated on a massive scale in the country.

Pakistan records rise in cement exports to India Pakistan cement sector witnessed around 42.5 percent increase in cement exports to 992,631 tons in the fiscal year 2015-16 as compared to 696,417 tons in the same period last year.

However, the cement export to Afghanistan fell by 15 percent and cement shipments fell by 32 percent in the reported period. The cement traders

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have a mellow as the additional excise duty imposed in federal budget 201617 might dampen the construction activities. The industry circles opine that there is no need to increase the tax as cement is already the most heavily taxed commodity in Pakistan. They also fear that new rules may increase the quantity of Iranian cement imported illegally in the country.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Pakistan cement recorded a 10.55 percent increase in total cement dispatches to 35.523 million tons in July-May period of the 2015/16 fiscal year as compared to the same period a year earlier.

The local sales increased by 17.84 percent to 30.03 million tons in JulyMay period of the 2015/16 fiscal year as compared to the same period a year earlier. The exports fell by 10.55 percent in in July-May period of the 2015/16 fiscal year as compared to the same period a year earlier.

Meanwhile, In May, the local cement sales increased by 22.78 percent year-on-year to 3.06 million tons.

Whereas, the exports fell to 558,000 tons from 560,000 tons. The total dispatches in May increased by 18.52 percent to 3.622 million tons, in the period under review.

Indonesia witnesses surge in cement consumption Indonesia cement market recorded a nine percent increase in cement consumption to 5.9 million in August 2016, as compared to the same period year earlier.

"Looking at the demand trend, the big cycle tends to give some guidance that demand normally picks up after one or two years of sluggish growth," said Joko Sogie and Ryan Daniel, analysts at Deutsche Verdhana Indonesia. The sales outside Java are main driver for growth in cement consumption. Cement consumption in Sumatra and Nusa Tenggara grew by 17.6 percent and 17 percent, respectively. Sales in Sulawesi climbed 14 percent while Java rose by 4.1 percent.

orders & equipment highlights

O

rders & equipment

Loesche to supply Hindupur grinding plant Indian company orders a vertical roller mill designed by Loesche Sri Balaha Chemicals has placed an order for a vertical roller mill designed by Loesche for their Hindupur grinding plant at Andhra Pradesh, India.

The mill designed for grinding granulated blast furnace slag will produce at a capacity of 50 t/h and the material is ground to a fineness of 4,000 cm²/g Blaine.

Additional equipment is included in the contract, such as mill fan, dampers, expansion joints, magnetic separator and metal detector. The lead time for the main components of the mill is 10 months.

The same mill type is operating successfully in the Indian cement plant at Bhavanipuram since 2001.

Loesche India has sold over 100 vertical roller mills for the grinding of raw material, coal, and cement to various clients in the country.

Nepal’s Shubhashree Agni Cement orders new mill Loesche India bags its first order in Nepal. Shubhashree Agni Cement Udhyog ordered Loesche’s Vertical Roller Mill LM 35.2+2CS, the first ever order in Nepal for Loesche India. With this order, Loesche India is now looking to further penetrate the market.

Shubhashree Agni Cement Udhyog has placed an order for Loesche Mill

LM 35.2+2CS for the cement grinding section of their integrated plant (of 700 tpd) which is under erection at Jaluke-6, district Arghakhachi, Nepal. The scope of the order includes mill fan and metal detector. The mill, designed for grinding Portland Slag Cement, will produce at a capacity of 62t/h with a fineness of 3500 Blaine. The mill will also produce Ordinary Portland Cement and Portland Pozzolana Cement at capacities of 60t/h and 76t/h respectively. The mill shall be delivered in a period of 10 months.

KHD Humboldt Wedag to supply equipment to Shree Cement Shree Cement awarded KHD with projects for three new kiln lines, each with a capacity of 6,000 tpd.

The first project is for line two at Shree’s Raipur site. The second new line will be built in Karnataka using a 3-string preheater and the below KHD core equipment: 3-String,

6-stage Preheater, PRZ 9575; 3-Pier Rotary Kiln Ø 5.4/5.0m x 75m long; PYROJET Burner; PYROSTEP Clinker Cooler, PSC 3-154.16T. The project commencement date was September 02, 2016. The third project will also be built using the above equipment. The location for the third project has yet to be announced.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

September / October 2016

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CONSTRUCTION BUILDING MATERIALS BY BMWEEK.COM

C

onstruction & building materials by bmweek.com

INDIA’S CONSTRUCTION SECTOR HEADS TOWARDS CYCLICAL UPTICK The construction sector in India is looking at a possible growth after stagnating between 2012 and 2015.

Investment in infrastructure is growing, as well as order inflows (up 70 percent year-on-year), but further investment and supportive government policies could boost this growth. In spite of strong inflows, revenues are only up by 11 percent in 2016, while core EPC returns are strong (20 percent). Working capital has remained high and can trend down, according to an analysis of the aggregate of 12 listed construction companies.

Inflation and interest rates can be significantly lower versus current expectations. Demand is also likely to pick up.

SRI LANKA'S CONSTRUCTION SECTOR REVIVED Increasing homeownership affordability, big government infrastructure projects and rising demand for high-rises will give a much needed boost to Sri Lanka’s construction sector. After the government halted some big infrastructure projects, growth in the sector slowed during 2015, while reviews of the costs and environmental impact remained pending.

FLY ASH SHORTAGE LIKELY TO INCREASE CEMENT IMPORTS FROM PAKISTAN The shortage of fly ash is hindering the production of cement for the domestic market in India, which is likely to cause a rise in Pakistani cement imports.

The fly ash supply from Indian thermal power units, used to create cement, has been insufficient to increase cement production in order to keep up with domestic demand.

This lack of supply has triggered a demand for Pakistani cement, with initial forecasts

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September / October 2016

According to analysts, the sector should have a very positive output in the next 2-3 years, as demand for housing increases.

The report said the listed Construction & Building Material Sector on the Colombo bourse is expected to provide a 46% average return (annualized 29%) over an 18-month period, well above the expected market return. Demand for skyscrapers will also rise, on pair with the country’s tourism activity, as well as increased need for office spaces.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

estimating exports to reach 1 million tons.

Indian domestic production is around 280 million tons. Cement is also immune from import duties, which makes it cheaper than domestic cement. Indian cement producers are currently pushing for additional import duties on cement. Recent attacks in Kashmir, linked to Pakistani terrorists have created tension between the two countries, with only some sectors, such as cement, escaping the restrictions.

TANGA CEMENT INTRODUCES NEW ALLPURPOSE CEMENT

INDIA TO USE FLY ASH IN ROAD CONSTRUCTION The Indian government is looking at industrial wastes as a cheap and lasting alternative to construct new roads, with fly ash ranking high in the priority list.

The Goa State Technical Agency (GSTA) is planning to use materials such as fly ash, char waste or slag as a base in road construction in order to curb the bleeding of hills and loss of green cover in rural Indian roads. "The use of char waste can not only prevent destruction of green hills due to excavation of hill slopes for

resources to construct roads, but also save a lot of money to the government," says K G Guptha, GSTA chairman, and head and professor of the Goa Engineering College.

Several construction works have already been undertaken, such as the construction of a nearly 12km western bypass between Nuvem and Navelim, as well as other projects. Early tests and research on the mix show both binding qualities and parameters are satisfactory; roads where this method was used show minimal damage after 4 years being exposed to torrential rainfall and heavy duty trucks.

YUCATAN RESEARCHER CREATE LIME-BASED CEMENT Yucatan researchers have developed a new variant of cement using lime, which is ecofriendly and flexible. The researchers at Anahuac Mayab University have designed cement composed of hydrated and pozzolan lime to produce a cement higher strength and sustainability.

The scientists measured the mechanical properties compared with existing ones; during impairment testing, the materials

ODISHA THERMAL POWER STATIONS TO USE WASTE ON CONSTRUCTION PROJECTS Pranab Prakash Dab, Odisha’s Energy minister claimed that the Indian state’s power stations could generate as much as 70 million tons of fly ash per year, once all projects were complete. Current annual

Tanzania-based Tanga Cement has launched all-purpose cement, which is suitable for wide range of construction activities.

“Understanding the significance of having sophisticated cement brands that best suit local practices of building houses, Tanga Cement has launched Mkombozi cement to cater for the increasing infrastructure project in the country,” said Leslie Massawe, National Sales Manager of the company.

The new product is affordable and is aimed to fulfill construction needs in Tanzania. Meanwhile, the company inaugurated an additional clinker production that has increased its capacity to 1.25 million tons from 500,000 tons per annum. In addition, the cement production volumes increased by seven percent in the first quarter of 2016, as compared to the same period last year.

were exposed to old techniques in chamber of salt corrosion and studied with a spectrophotometer color loss of material. The researchers have begun with the second level of the research to test the effect of prototype of the plant. “In this new stage the development of a pilot plant feeders, where they could generate different cementitious formulations raised in a controlled manner, "said one of the researchers. output sits at around 25 million tons of fly ash.

Odisha’s State Pollution Control Board requested current power plants and IPPs (Independent Power Producers) to create captive fly ash ponds, and use the material in the production of bricks, blocks and roads.

Presently, there are about 7 thermal stations

operating in Odisha, but the government has signed agreements with 30 IPPs for the set-up of thermal power generation projects in different parts of the state. Of these 30 agreements, 3 have already started production, while 4 are under construction, 20 haven’t started to work on the project yet, while 3 of the accords fell through due to different reasons.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

September / October 2016

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PETCOKE PRODUCTION, SHIPPING AND PRICING BY PETCOKEWEEK.COM

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etcoke production, shipping and pricing by petcokeweek.com

CEMENT MARKET EXPECTS HIGHER DEMAND AND PRICES The Indian cement market demand is expected to increase by six percent in the first quarter of FY2017, as compared to 4.6 percent in the same period last year. The rising demand is expected to be supported by an increase in cement prices in the near term. Meanwhile, an increase in infrastructure segments and the recovery in the rural demand from the second half of the current financial year, given the better monsoons, are expected to have a positive impact on the sector. "While the government’s emphasis on the infrastructure projects is likely to result in increased public sector investments, the revival of the public private partnership (PPP) is critical to improve the pace of the infrastructure development," said Sabyasachi Majumdar, senior vice president, ICRA Ratings. Meanwhile, cement production registered a growth of four percent during AprilJuly 2016, as compared to the same period last year.

The cement sector is expected to benefit from energy cost savings and the recent increase in the coal and petcoke prices.

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RISING PETCOKE PRICES TO AFFECT CEMENT COMPANIES’ PROFIT MARGINS Rising power prices will likely dilute cement companies’ profit margins during the 4th quarter of 2016, says the Senior Vice President of ICRA Ratings, Sabyasachi Majumdar.

Coal and petcoke prices have been increasing since the beginning of the year, which contracted profit margins

for cement companies. Petcoke prices have been on the rise since February 2016, and reached around INR 6400 per metric ton in August. Coal prices started growing in May, and in July were higher by 12.5 percent year-on-year. Diesel prices also increased by 12.5 percent when compared to July 2015. The same company forecasts a modest growth for cement companies during the fiscal year of 2017, due to a public investment policy in infrastructure and new publicprivate partnership projects.

VISAKHAPATNAM CHENNAI INDUSTRIAL CORRIDOR TO INCLUDE PETROLEUM HUB HPCL is expanding its Visakh refinery’s capacity from 8.33 million tons to 15 million tons in anticipation of a petroleum hub to be built in the region. Investment will be about INR 18,412 crore. The Visakhapatnam Chennai Industrial Corridor will be home to a new petroleum hub, in replacement of the one in the Petroleum, Chemical and Petrochemical Investment Region (PCPIR), which won't be built due to popular demand.

INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

HPCL is also in talks with partners to build a petrochemical complex between Visakhapatnam and Kakinada. Loans and grants by the state government and the Asian Development Grant have already been sanctioned, rounding the USD 631 million.

The state of Andhra Pradesh, where the hub will be located, is currently undergoing a series of investment programs in order to help development, which could bring in a further USD 215 million for the project.

CEMENT PRICES INCREASE ACROSS INDIA, 2QFY2017

ESSAR OIL SELLS 98 PERCENT STAKE TO CONSORTIUM HEADED BY ROSNEFT Indian Prime-Minister Narendra Modi and Russian President Vladimir Putin oversaw the sealing of a USD 13 billion (INR 86,100 crore) deal by Essar Group to sell its oil assets to a consortium led by Rosneft. Essar Oil India amounts to 25-30 percent of Essar’s portfolio. Essar sold 98 percent

of its stake in Essar Oil to the stateowned Russian energy giant, along with Switzerland-based commodity trader Trafigura. The deal included USD 4.5 billion in debt.

Trafigura and Rosneft will hold an equity share of Essar Oil each. Among the several assets involved in the transaction is the company’s Vadinar refinery, which produces petcoke, along with the Vadinar port.

US: PETCOKE REFINERY LIKELY TO BE SOLD Dutch Shell enlisted a German company to find a buyer for its Martinez refinery in the state of California.

Local officials from Martinez, where the company has operated for over a century, claim they’re in the dark about a possible sale ever since an initial report in June.

They have concerns about whether a new operator could benefit the community as Shell has, and be a good corporate citizen. “The relationship the city has had with Shell has been a close one; it’s not just ‘the refinery,’ it’s a part of the city’s cultural fabric,” said Mayor Rob Schroder.

According to him, council members have

In Andhra Pradesh and Telangana, prices remained stable after rising

by INR 55 per bag in September.

Demand remains sluggish, with the growth rate falling from 6 percent in the first quarter of 2016-17 to 2.3 percent year-on-year in the quarter of July-September 2016. Cement prices are under pressure from petcoke costs. A ton of petcoke is now being sold for USD 53 per ton, after a rally of over 50 percent in the last months.

read news regarding the sale, but Shell managers have had no official say.

Royal Dutch Shell reportedly enlisted Deutsche Bank to find a buyer for the refinery, which produces petcoke, diesel fuel, gasoline, jet fuel, industrial fuel oils, liquefied petroleum gas, asphalt and sulfur. New Jersey-based PBF energy, which recently bought a similar refinery in Torrence, is reportedly interested in acquiring the unit. In 2014, the company was seeking to shut down one of Martinez’ coker units in an effort to increase refinery efficiency and to make its operations more environmentally friendly.

PETCOKE PRICES CONTINUE TO RISE Indian petcoke manufacturers have raised petcoke prices by 9.5 percent when compared to the September quarter. This is particularly disruptive to the domestic market, whose profit margins had been increasing after switching from coal to the cheapest fuel.

Pan-Indian cement prices increased

by INR 3 per 50-kilogram bag monthon-month for October. A cement bag is now being sold for an average price of INR 332 per unit. In the past few months, prices have come up by INR 30-40 per bag across West, North, and Central India. In the state of Maharashtra, cement prices jumped

by INR 24 per bag for October.

Cement companies will take the largest hit, especially those without a high forward cover. In some regions, companies are already increasing product prices in an attempt to set off the increase in operating costs.

CHINA: SHANDONG PROVINCE ASSESSES LOCAL REFINERIES By the end of 2015, coking capacity in the Shandong province was of 43.65 million tons per year, but the increase in proportion of fuel oil the crude oil refining process meant a decrease of delayed coking operations.

According to a report, Dongying Kenli, a Chinese company that has a large output of petcoke, will gradually phase out its production of that petroleum byproduct.

Despite this, the company is starting a new coking unit at its Binzhou plant, although it doesn’t mention when it will be commissioned.

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analyst recommendations JK Cement Religare is bullish on JK Cement has recommended buy rating on the stock with a target price of Rs 830 in its research report. “We maintain our estimates and roll over to Sep’17 TP of Rs 830 (from a Mar’17 TP of Rs 720), set at 8x one-year forward EV/EBITDA.

UltraTech Cement According to Nirmal Bang's research report, UltraTech Cement is a strong franchise in the cement space which can deliver sustainable growth in earnings and continue to trade at higher multiples

as it enjoys a scarcity premium. However, despite their firm belief, they have downgraded their rating on the stock to Sell (from Accumulate earlier) as Nirmal Bang believes the risk-return trade-off is completely tilted in favour of risk at the moment, reports moneycontrol.

JKCE’s recent 3mn tonne expansion in the region coincides with better prices in the north, auguring well for profitability. Maintain BUY,” recommend analysts from Religare.

Ambuja Cements Sudarshan Sukhani of s2analytics.com recommends selling Ambuja Cements.

"Unfortunately, Ambuja Cements is a short sell. It has come in my short sell list earlier also. It has made a bearish head and shoulder. The stock is giving

us the sense of large distribution and significant correction. I don’t know why.

However, these are three short selling ideas primarily for the day, at the most till tomorrow morning," according to Mr. Sukhani.

ACC Heidelberg Cement Dynamic Levels is bullish on Heidelberg Cement recommending a buy rating on the stock with a target price of Rs 134 in its research report. Heidelberg Cement offers a wide range of high quality products.

Due to the heavy weight of cement and aggregates compared with their price, production is usually located in close proximity to the sales markets. “We recommend buying Heidelberg Cement; target of Rs 134”, added the analyst.

India Cement ICICI Direct is bullish on India Cement recommended a buy rating on the stock with a target price of Rs 190 in its research report. India Cement (ICL), as one of the largest cement manufacturers in the southern region, is expected to be a key beneficiary of a demand revival in

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INDIA CEMENT & CONSTRUCTION MATERIALS MAGAZINE

Sandeep Wagle of powermywealth.com recommends buying ACC stock. "Buy ACC with a stop loss at Rs 1647 for target of Rs 1725," he added. He also recommends buying Tata Communications with a stop loss at Rs 626 for target of Rs 689 and JSW Steel with a stop loss at Rs 1790 and target of Rs 1880. the key south regions, especially Andhra Pradesh (AP) and Telangana, according to ICICI Direct.

"The stock is trading at attractive valuation of US$80/tonne. Hence, we upgrade the stock from to BUY with a revised target price of Rs 190 (i.e. valuing at EV/tonne of US$90)”, the analysts added.

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Flashback NEWS FLOW IN CEMWEEK.COM LAST TWO MONTHS (darker blue shows higher news volume)

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cw group agenda / reports 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. To learn more, please visit http://research.cwgrp.com/meetings

CW group meeting agenda include: October 11, 2016 October 19-20, 2016

Global Cement Trade Prices 3Q 2016

Webinars

Cement Business & Industry South Asia 2016 Mumbai, India

Conference

November 3, 2016

Global Quicklime, Slaked Lime and Hydraulic Lime Market

December 6, 2016

AshTrade Asia

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Cw research newest report:

Webinars

New Delhi, India

September / October 2016

Conference

India Petcoke CFR

Global Cement Trade Price Report 3Q2016

white cement Report 2016 VFR 2H2016

October 2016

October 2016

October 2016

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BUZZ

economic

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India: Two cement companies bag limestone blocks 2. South India records hike in cement prices 3. India: KCP Cement to focus on expansion 4. India: Nirma Cements raise funds for acquisition 5. India: Researchers develop building material from red mud and fly ash 6. Indian cement companies record higher market capitalization 7. India: CMA expects increased capacity, production by 2019-20 8. India: Mangalam Cement begins operation of cement plant 9. India: Fly ash to be used for road construction 10. India: Orient Cement buys cement assets from Jaypee

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Russian companies acquire Indian oil assets Chinese refinery to decrease petcoke production in 2018 Serbian refinery to start petcoke production by 2020 Coke drums moving across Mexico CW Research: Weekly petcoke market update US: Petcoke refinery likely to be sold India: Cement prices higher due to fuel costs Kaliningrad, Russia: Concrete producers pay more for cement Saudi Aramco denies bidding for petcoke refinery

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Lafarge Cement signs agreement with Iraqi company 2. Nigeria: Cement prices increases 3. Indonesia: Jung Mohira Cement to begin operation soon 4. LafargeHolcim announces more divestments 5. Kenya: Dangote Cement begins imports from Ethiopia 6. Cemex participates in restructuring of Grupo Cementos de Chihuahua 7. Dangote Cement to increase cement prices in Nigeria 8. Turkey: Van Çimento to increase investment in cement plant 9. CMA begins operation of new cement plant 10. LafargeHolcim to divest assets in Polpaico, Chile

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TOP BMWeek.com STORIES 1.

Estonia: Construction price index took an upturn in Q#\3 2. New type of concrete developed in Singapore 3. Argentina: New ecological concrete plant being built 4. Eurozone production in construction decreases 5. Nigeria may use cement for road construction 6. Saudi Arabia’s construction to slowdown in 2017 7. Sika acquires mortar manufacturer in Asian market 8. Mexican researchers create resistant concrete with construction debris 9. France: Construction costs stabilize 10. Cemex to supply concrete to power plant in Poland

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TRADE ASH ASIA 2016

BUSINESS, LOGISTICS AND TECHNICAL COAL COMBUSTION BY-PRODUCTS MEETING

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