India Cement & Construction Materials (vol 1 / issue 34) by CemWeek

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issue 34

Cement

JANUARY/FEBRUARY 2017

& construction Materials

Q&A: Leaders

CW RESEARCH

Union Budget

Seabased

Mr. Ravinder Reddy Marketing Director in Bharathi Cement

Seaborne trade of cementitious products

feature CATALYST OF DEMAND:

Building India's road network

News

Analysis

Market Coverage

Interviews

People

The must-have cement and clinker

price intelligence

chartbook

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

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

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EDITORIAL LETTER

NUMBERS IN BRIEF

Ravinder Reddy: Perspective on the Union Budget 2017-18

Mr. Ravinder Reddy's perspective on the impact that the new budget will have on the cement industry

08 CW Research: Seaborne trade of cementitious products

Trade of cementitious products remains small compared to total consumption

CATALYST OF DEMAND: Building India's road network

India has the second-largest road network after the United States and has embarked on a massive road construction program

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Cement & construction Materials

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Expectations for cement industry in 2017

rOBERT MADEIRA cemweek publisher head of cw group research

India’s cement demand bound to grow

Luísa Azevedo Editorial Coordinator

research and analytics 26 Cement Volumes 28 Cement Energy 46 ANALYST RECOMMENDATIONS

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letter from editor

Expectations for the Cement Industry Prospects for cement demand in 2017 are more optimistic

n the February issue of ICCM Magazine we address the expectations for the cement industry in 2017. With the announced Union Budget for this year, the cement industry expects a policy that could standardize construction materials. This issue contains the perspective of Ravinder Reddy, Marketing Director at Bharathi Cement, for whom the Indian cement makers will benefit from the reduced and rationalized excise duty structure introduced by Union Budget. We also take a look at the prospects for cement demand in 2017, as these are more optimistic than in previous years, with a noticeable growing trend in regions with higher infrastructural spending, such as India. The global seaborne trade of cement products is expected to increase over the next five years, according to a study conducted by CW Group. The research presents key cement and clinker supply-demand gaps that will sustain world cement trading in the next few years. Particular emphasis is given to understand the possible supply

JANUARY / FEBRUARY 2017

options and export terminals, new export facilities, around the world and on strategic implications for future supplyside dynamics. Elsewhere in this issue we look at how the use of petcoke grows exponentially on a global scale, with more than 100 refineries producing petcoke across the globe. In 2016, India had a strong growth in petroleum products, reflecting the trend of shifting companies away from coal toward petcoke. As usual, ICCM Magazine provides all the relevant news about the main indicators of the industry, including the latest facts and figures about cement volumes, energy prices, and relevant people in the business, regional developments, equipment, and construction projects.

ROBERT MADEIRA

CEMWEEK PUBLISHER HEAD OF CW GROUP RESEARCH

India Cement and Construction Materials Journal

LuĂsa Azevedo

Editorial Coordinator

numbersin brief India’s cement demand

bound to grow

After some cement manufactures were affected by demonetization in 2016, the Indian cement industry is expected to exceed seven percent growth over the next couple of years. Though not uniform across India’s north, south and central region, cement manufacturers registered better volumes in 2016 when compared to 2015. Increased demand is an across the board expectation given the government’s infrastructure building initiatives. CHART: India cement demand (million tons) and YoY change Cement consumption

450

YoY % change

10%

150

2015

2016

2017F

2018F

2019F

2020F

2021F

Source: CW Research

300

Combined with the “Make in India” campaign, domestic supply of cement to India is bound to increase. By the end of 2017, cement demand will reach around 310 million tons, to grow by 7.0 percent compared to 2016. CHART: Real GDP (million INR) GDP

200,000

YoY % change

10%

2015

2016

2017F

2018F

2019F

2020F

2021F

Source: IMF, CW Research

100,000

The forecast for India’s cement demand is also supported by real GDP’s combined annual growth of 7.9 percent. Nevertheless, expectations are subject to global headwinds, yet to a much lesser extent than in the case of other economies, are public investments announced by the Indian government will have a multiplier effect.

India Cement and Construction Materials Journal

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Q&A: Leaders

Ravinder Reddy: Perspective on the Union Budget 2017-18

The 2017 Union Budget, presented by Finance Minister Arun Jaitley, was broadly focused on 10 themes and the main ones are infrastructure, the rural population, the poor and underprivileged health care. Focused on this, Mr. Ravinder Reddy, Marketing Director at Bharathi Cement, in an interview with Philip Capital, gave his perspective on the impact that the new budget will have on the cement industry.

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India Cement and Construction Materials Journal

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Q&A: Leaders Union Budget Impact

In an exclusive interview with Philip Capital, Ravinder Reddy, Marketing Director at Bharathi Cement, spoke about the Union Budget 2017-18 and his perspective on what this budget will bring. He has also addressed the growth prospects of Bharathi Cement. The cement industry is facing a challenging time as declining demand brought about by the impact of demonetization has and a negative impact on cement demand. The industry will be looking at the Union Budget for some relief, as the increase in infrastructure spending would indirectly increase demand in the sector. Indian cement makers will benefit if the Union Budget introduced a reduced and rationalised excise duty structure as, lower cost of construction would further positively stimulate cement sector demand. Additionally, the Goods and Services Tax (GST), if implemented in the first half of fiscal year 2017-18, would ease pressure on the sector.

Based on the three pillars of "Transform, Energize and Clean India", the Budget is largely focused on rural development, infrastructure, transparency and prudent fiscal management meant to accelerate economic growth. A report by Axis Capital foresees that the government will impose an INR 400 per ton cess on petcoke, amid rising imports of the fuel. Over the last two years, the Center has imposed an INR 300 per ton clean energy tax on coal, but has so far spared petcoke.

Expectations for cement industry

Ravinder Reddy, Marketing Director at Bharathi Cement, in an exclusive radio interview to Phillip Capital said that "Bharathi is looking at a 5 percent market share of the Indian cement industry in about 10 years." Duty rates on cement - at 12.5 percent plus specific duty - are among the highest and next only to luxury goods such as cars. Any cut would lead to improvement in margins

Bharathi is looking at a 5 percent market share of the Indian cement industry in about 10 years

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India Cement and Construction Materials Journal

for cement players. The Nirmal Bang report, however, sees no relief. Since 2008, import of cement into India has been allowed free of basic customs duty, while all the major inputs for manufacturing cement - limestone, gypsum, coal, petcoke, packing bags, continue to attract a customs duty. Given the current reduced demand for cement and idle domestic capacity, the industry has sought customs duty on cement imports. The real estate sector has been the second largest employer in India after agriculture. Moreover, market estimates suggest that it will grow by as much as 30 percent in the next decade. Consequently, the stakeholders have high expectations for this year's Union Budget. A total allocation of IRN 39, 61,354 has been made for infrastructure will have a trickledown effect on other sectors such as cement, capital goods and steel, besides direct beneficiaries such as road construction companies, real estate companies and those

TOTAL NUMBER OF CONSTRUCTION EQUIPMENT UNITS SOLD ('000) 100 CAGR 6.18%

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY18E

Indian cement makers will benefit if the Union Budget introduced a reduced and rationalised excise duty structure

Notes: CAGR - Compounded Annual Growth Rate, FY - Indian Financial Year (April-March). E - Estimate, YoY - Year on Year Source: NBM & CW, Mahindra Website, TechSci Research;

Year-on-Year growth in demand is small, and for now we do not see new projects coming

supplying to the railways. Dalmia Bharat, Ramco Cement and Aditya Birla Group are among the cement companies that would gain from an infrastructure and housing boost, while JK Cement and JK Lakshmi are among the cement companies that could benefit from a simplification of the excise duty structure. Ravinder Reddy, from Bharathi Cement, said: "Year-on-Year growth in demand is small, and for now we do not see new

projects coming since there are already huge infrastructure projects currently in progress and cement demand is expected to grow any moment in Amaravati, the new capital state of Andhra Pradeshâ&#x20AC;?. With the expected boost for the cement industry caused by the Union budget 201718 Bharathi Cement hopes to increase the production in its two factories. "At the Gulbarga plant, we expect to produce 20 million tons in 2017â&#x20AC;?

India Cement and Construction Materials Journal

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feature

Catalyst of Demand:

building India's road network India has the second-largest road network after the United States and has embarked on a massive road construction program. Road building and upgrading is essential to the government's vision for economic modernization as well as providing short-term stimulus.

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India Cement and Construction Materials Journal

Source: google.com

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

feature

National Highway 11, Jaipur Agra NH11, Rajasthan

India’s 20162017 Union Budget provides a significant outlay for infrastructure expenditure. These spending are seen as a key component of the government’s plans to boost India’s growth levels to projections ranging between 7 and 9 percent

ith the rising need for infrastructure in India, a stable system of world class roads has become necessary to encourage further investments in the country. Hence, since 2014, the Ministry of Road Transport and Highways has proposed multiple road construction projects that meet the global standards, and are cost effective on the long run. The Ministry has announced its intention to use concrete as the construction

Roads and Bridge Infrastructure Value in India (USD billion)

25 20

CAGR + 13.7%

15 10 5 0

FY '09

FY'10

FY '11

FY '12

Source: IBEF

september JANUARY / FEBRUARY - october2017 2015

material for new highways. Higher durability and lower maintenance costs were pointed out as the primary reason for proposing concrete over bitumen for future road construction projects. Such initiatives by the government are bound to be a catalyst for growth in the cement industry. Representatives from the Road Transport Ministry has already announced their initiatives to enter long term partnerships with local cement firms to ensure cost effective procurement of cement.

India INDIA Cement CEMENT and & CONSTRUCTION ConstructionMATERIALS MaterialsMAGAZINE Journal

FY '13

FY '14

FY '15

FY '16

FY '17E

Government initiatives focused on infrastructure recovery

Currently, the infrastructure sector is in a state of flux, with the sector being hit by slowdown in the economy and strain being faced by various infrastructure developers. Contrarily, the sector continues to be one

hedge fund, plans to invest over INR 2,000 crore (USD 306 million) in Hyderabadbased infrastructure developer Transstroy India Ltd., for construction of highways in the country. India’s 2016-2017 Union Budget provides a significant outlay for infrastructure expenditure. These spending are seen as a key component of

Length of National Highway Vs. Central Government Investments on National Highways Expenditure on National highwaysDevelopment (Crore)

120,000

500

100,000

400

80,000

300

60,000 200

40,000

100

20,000

Investments (INR billion)

Road Length (Kms)

Length of National highways (km.)

’06-’07 ’07-’08 ’08-’09 ’09-’10 ’10-’11 ’11-’12 ’12-’13 ’13-’14 ’14-’15 ’15-’16

Source: Indian Road Transport Ministry reports

of the main thrusts pushing the economy in the upward direction. The government is making attempts to revive the Public Private Partnerships (PPPs) which is evident through passage of Public Utility (Resolution of Disputes) Bill introduced in the last financial budget to resolve disputes in PPP projects in a speedier and time bound manner.

the government’s plans to boost India’s growth levels to projections ranging between 7 and 9 percent. Issues and concern, remain. For instance, data from the road ministry shows that up

India needs more than USD 1.5 trillion in investment over the next 10 years to fill the infrastructure gap to the end of April 2015, there were 112 pending cases involving INR 25,000 crore under arbitration between the National Highway Authority of India (NHAI) and private developers.

Main challenges hindering the development of road infrastructures

Irrespective of government initiatives the lack of adequate capacity from a technology and capital investment point of view is limiting the infrastructural development. Growth of the infrastructure sector is dependent on solving some key challenges related to reducing regulatory uncertainty, developing appropriate financing mechanisms and ensuring efficient project management (from bid to execution).

Additionally, the Ministry of Road Transport and Highways, and Shipping, has announced a targeted investment of INR 25 trillion (USD 376.53 billion) in infrastructure over a period of three years. This investment will include INR 8 trillion (USD 120.49 billion) for developing 27 industrial clusters and an additional USD 5 trillion (USD 75.30 billion) for road, railway, and port connectivity projects. Also, a number of international firms are investing in infrastructural space. For instance, Silver Spring Capital Management, a Hong Kong-based equity

Mumbai Pune Expressway

INDIA IndiaCEMENT Cement& and CONSTRUCTION Construction MATERIALS Materials MAGAZINE Journal september JANUARY /-FEBRUARY october 2015 2017

feature Some of the key issues plaguing the sector. They essentially relate to the land acquisition and the overall tabulation, the lack of coordination between the various government agencies or of adequate structuring of the projects, particularly the demarcation of rewards between governmental and private entities. The lack of an adequate mechanism for resolving disputes between private agents and government agencies and the debt of contractorâ&#x20AC;&#x2122;s leads to delays in project implementation are two other major problems.

100 Smart Cities in India

Government initiatives to overcome challenges & set pace towards infrastructural development The Indian Government has earmarked INR 50,000 crore (USD 7.34 billion) to develop 100 smart cities across the country. The Government released its list of 98 cities for the smart cities project in August 2015.

Road Construction Equipment

The government has built new methods of contracts to attract private investors to the road sector. In this way, the government

100 Smart Cities in India

recognized investment areas to upgrade the existing infrastructure. India needs more than USD 1.5 trillion in investment over the next 10 years to fill the infrastructure gap as the government plans to connect seven hundred thousand villages with roads by 2019 as part of a massive modernization plan.

The demand for cement in India is likely to increase to up to 45 million tons (MT) in the next three to four years Additionally, parallel developments in tax reforms such as expected implementation of the GST in 2017 is expected to have a

Source: IBEF

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India Cement and Construction Materials Journal

year end to 395 MT from the current level of 366 MT. Further increase to 421 MT by the end of 2017 is also estimated. On the backdrop of growing demand stimulated by increased construction and infrastructural activities, the cement sector in India is witnessing many investments and developments in recent times. As per the data released by the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth USD 3.109 billion between April 2000 and March 2016.

positive impact on the cement industry, as it is crucial for the infrastructure sector. It is likely that the tax rates may be reduced to 18-20% from the current tax rates of 27-32%. This reduction in the tax rates of the cement industry will help the cement companies to save money in logistics costs.

Cement dynamics influence the development of road infrastructures

A significant impact of government initiatives (investments & changes in reforms) is expected to be experienced by the cement sector. The demand for cement in India is likely to increase to up to 45 million tons (MT) in the next three to four years. Further, the Indian cement demand is expected to reach 550-600 Million tons per year by 2025. Biggest demand driver would be housing sector which holds 67% share in total consumption. The other major consumers of cement comprise infrastructure at 13%, commercial construction at 11% and industrial construction at 9%. Thus, an increase in demand is expected to provide an indirect boost to the infrastructural development. To manage the rise in demand the cement companies are likely to add 56 MT capacity over the next three years. This is set to trigger an increase in cement capacity in India registering a growth of 8% by next

Reacting to all the developments in infrastructural space, the cement manufacturers are undertaking various growth strategies to sustain their hold in the market. Some of the manufacturers are revamping their production capacities to accommodate the customer demands. In September 2016, Burnpur Cement announced its plans to invest INR 500 crore (USD 74.64 million) for expansion of its production capacity to 3 MTPA in the coming three to four years. JSW Group plans to expand its cement production capacity to 30 MTPA from 5 MTPA by setting up grinding units closer to its steel plants. In October 2014, JSW Cement Ltd announced its plans to set up a 3 MTPA clinkerisation plant at Chittapur in Karnataka for an estimated cost of INR 2,500 crore (USD 366.8 million). In June 2016, FLSmidth (a global engineering company based in Copenhagen) signed a contract with India’s Larsen & Toubro Limited for engineering, procurement and supply of equipment for a complete cement production line with a capacity of 3,000 ton in Tamil Nadu. Similarly, in October 2016, Dalmia Cement (Bharat) Ltd invested around INR 2,000 crore (USD 293 million) to expand its business in North East. Currently, the company currently has three manufacturing plants in the region — one in Meghalaya and two in Assam. Some of the manufacturers are following inorganic growth strategies primarily acquisition of complementary firms.

Currently, the infrastructure sector is in a state of flux, with the sector being hit by slowdown in the economy and strain being faced by various infrastructure developers For instance, In March 2016, KKR Mauritius Cement Investments Limited acquired 8.5% stake in Dalmia Bharat Limited (DBL). In February 2016, India's largest cement maker UltraTech Cement announced its plans to acquired Jaiprakash Associates’ cement factories in six states for a total value of INR 16,500 crore (USD 2.42 billion). Further, In January 2015, UltraTech Cement Ltd charted out its next phase of Greenfield expansion after a period of aggressive acquisitions over the last two years. The firm has plans to set up two Greenfield grinding units in Bihar and West Bengal. Also, in December 2014, UltraTech Cement Ltd announced its plans to acquire 2 cement plants and related power assets of Jaiprakash Associates Ltd in Madhya Pradesh for INR 5,400 crore (USD 792.3 million). In August 2015, Birla Corporation Ltd, a part of the MP Birla Group made an agreement to acquire two cement assets of Lafarge India for an enterprise value of INR 5,000 crore (USD 733.6 million). Thus, the government support in terms of friendlier laws, lower taxation, and increased infrastructure spending as well as steady growth in private domestic and foreign investments is expected to back the growth of cement sector and take forward the Indian infrastructural development along with it

India Cement and Construction Materials Journal

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feature

cw research:

Sea-based

trade of cementitious products projected to increase over the next five years Trade of cementitious products remains small compared to total consumption Seaborne trade of cementitious products, including gray cement, white cement, gray and white clinker, slag, and fly ash continues to be a small portion of the total volume consumed throughout the world. However, a number of market factors will likely boost this kind of exchange over the coming years, while also changing the patterns of trade between regions.

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feature

The current state of seaborne transportation of cementitious products

Cementitious trade continued to account for a mere 2.3 percent of all cementitious products consumed during the last year.

A major shift in terms of trade of cement, clinker, slag and fly ash happened during the 1960s. At the time, new players pushed their way into the cement sector, breaking the existing oligopoly while a state of persistent overcapacity forced markets to open up to global trade. However, trading cementitious materials remained a challenge due to its low bulk value, and

many bulk operators continued to be reticent when it came to transport those products, given its low turnover per ton and the inconvenience of dust spillage. In 2015, cementitious products shipped by sea grew to 171.9 million tons. Last year, traded volume was estimated at 174.1 million tons, a yearly increase of 1.3 percent. From 2010 to 2016, there was an increase in volume of 25.2 million tons, translating into an average per annum

Global consumption of cementitious products (Mn tons)

10000 CAGR 3.7%

9000 8000 7000 6000 5000 4000

2010

2011

2012

Source: CW Research

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2013

2014

2015

2016E

growth of 2.6 percent. Shipping via sea corresponds to around 80 percent of the total volume of trade. Even so, sea-based trade was only equivalent to 2.3 percent of total global consumption of cementitious products last year.

Another important factor is the business environment of the market. Companies will opt for importing cementitious products when setting up new capacity is challenging. In developed countries, setting new capacity is frequently made

Cementitious materials outlook by product (mn tons)

Gray cement

Clinker

Slag

White cement

Fly ash

250 200 150 100

With an increase of seaborne trade of cementitious products, it is fair to expect an increase in their number either through new builds or conversions

50 0

2016E

2017F

2018F

2019F

2020F

2021F

Source: CW Research

Gray cement is, by far, the most traded cementitious product via sea. Its share of volume reached 54 percent in 2010 and has since come down to 51 percent. Clinker accounted for 33 percent in 2010 and it remained relatively stable since then. The share of slag in seaborne trade climbed from nine percent to 12 percent from 2010 to 2016, while white cement and fly ash also grew slightly, from two to three percent, and from one to two percent, respectively. Those shares roughly correspond to the share of each product in global consumption. Companies are often driven to export by pressure over their utilization rates. Maintaining production at a stable level is important to save fuel and monetize installed machinery. For companies, savings associated to a healthy utilization rate often become a stronger incentive than the possible yield from exporting margins. This strategy is usually followed by larger companies, with extensive logistic networks that allow them to internally ship cementitious products without prohibitive losses.

difficult by environmental regulations, while in developing countries, political, economic, and security issues are the main obstacles. Nowadays, the trading of cementitious products by sea is dominated by internal flows of five major companies, such as LafargeHolcim and HC Trading, which represent 60 percent of the total volume. These major companies strategically locate grinding units and integrated plants near the coast to export cement. There are around 150 waterside integrated plants and 100 plus waterside grinding factories, associated with terminals strategically set in undersupplied markets. Outside those companies, independent traders, which directly acquire the product from manufacturers and normally possess a large portfolio with other bulk commodities, are also important players in the seaborne trade, representing around 30 percent of the traded volume. Around the world there are currently 800 cement terminals, concentrated around

East Asia, specifically in Japan where a lot of slag trading exists. Those terminals serve large routes like Asia-Pacific, where 90 million tons of cementitious materials were served last year. There, gray cement accounted for 47 percent of the volume, while gray and white clinker represented 35 percent of the total volume. Other major regions of trade include Europe, where intra-Mediterranean trade reached 4.6 million tons and routes in the Baltic Sea bulked 1.8 million tons. In the Americas, Caribbean countries traded 6.6 million tons while the North-East coast, including the U.S. coast on the Gulf, carried six million tons.

What to expect in the future

By 2021, seaborne trade of cementitious products is forecasted to reach 203.7 million tons, an increase of 14.6 percent compared to 2016â&#x20AC;&#x2122;s estimate or the equivalent to an average annual growth rate of 3.2 percent over the next five years. Market indicators like production shortages or the optimization of supply chains will likely be the major dynamic driving seaborne trade, but several others factors are also seen as explainers of this trend.

India Cement and Construction Materials Journal

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feature As previously noted, environmental regulations sometimes block the construction of new units or limit the utilization rate of installed capacity. This is especially true for developed countries, such as US, New Zeeland and Australia where rising demand will leave no alternative aside from importing cementitious materials. A major question mark to this factor is how the new United States Administration and its attitude towards green policies will influence domestic capacity and, consequently, seaborne trade in the United States. Another explaining factor is overcapacity in major cement producing markets like Turkey, Taiwan, Vietnam, China, and Iran. Those countries rapidly expanded their capacity to answer growing demand, but now that domestic consumption has declined, manufacturers are faced with surplus capacities. Producers there will have no choice but to export, even at margins considered to be low, in order to sell their stock and maintain their utilization rates.

The next five years will also bring a qualitative change in the routes followed by seaborne trade.

Limestone availability is also a factor to take into account. There are some markets, like Bangladesh or CĂ´te dâ&#x20AC;&#x2122;Ivoire and Gana where clinker and cement imports are traditionally a consequence of limestone scarcity. However, in other countries, like India, where demand for higher quality clinker is not matched by existing reserves of high quality limestone, companies are largely starting to prefer new trading relations. In the case of India, the UAE has become a major supplier of clinker. This brings us to another factor boosting seaborne trade: the raising demand for white cement. With growing purchasing power in developing countries like India, consumers will augment their intake of white cement. For some regions, importing white cement will be a more rational option than specializing installed capacity or building new plants.

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There is at least one factor slightly displacing the aforementioned ones. The increase in self-sufficiency in countries like Algeria will possibly have a negative effect on the volume of sea-based cementitious productsâ&#x20AC;&#x2122; trade. However, it is important to consider that some countries where capacity grew at a fast pace, like the case of Indonesia, have gone from importers to exporters. Apart from the predicted increase in volume, the next five years will also bring a qualitative change in the routes followed by seaborne trade. Taking into account the growing body of environmental regulation, trading routes leading to North America will likely experience a significant increase in both the East and the West coast, as well as in the Great Lakes. Compared to 2016, volumes entering the United States are expected

By 2021, seaborne trade of cementitious products is forecasted to reach 203.7 million tons

to rise by 10.4 percent. At the same time, trading received by North Africa is expected to fall, given the growth of installed capacity in the region.

The impact on bulk: the case for specialized cement carriers

Finally, these factors will have an impact on the global fleet of specialized cement carriers. These carriers are faster to load and unload, are able to do so under adverse weather conditions, and avoid cement spillage, a controversial issue in some countries. Right now, the number of these vessels rounds 300, which are concentrated in the East Asia region due to higher volume of trade in the region and rules concerning cement spillage in Japan and South Korea. That same kind of rule justifies another smaller concentration of these carriers in Northern Europe. In India and the Baltic region, weather conditions are the preponderant factor in the choice to use specialized cement carriers.

Additionally, there are somewhere near 200 specialized carriers below the 1,000 dead weight tonnage operating in lakes and rivers, agglomerated in the Great Lakes. Coastal shipping within countries like Japan, Greece, South Korea, Indonesia, and the Philippines represents around 50 to 60 million tons per annum. The utilization rate of specialized cement carriers is nearing 100 percent. With an increase of seaborne trade of cementitious products, it is fair to expect an increase in their number either through new builds or conversions. Reversely, fewer

cementitious products will be transported in general bulkers. Seaborne transportation of cementitious products remains a relatively small activity. However, it has grown steadily in the last years and, if forecasts here presented become true, will continue to do so in the next half decade. During the next five years, it will be interesting to observe how close the actual volume of trade and direction of flows will fall from the predictions made, and to witness the impact of those trends in the bulk sector

India Cement and Construction Materials Journal

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feature

cw research:

Growing use of

petcoke as fuel in cement industries This is a two part webinar conducted by CW Group where the first part talks about the petcoke industry development trends and marketing analysis with particular focus on trade dynamics

JANUARY / FEBRUARY 2017

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

feature

Increasing investments, high electricity demand and growing population are some of the key drivers of the petroleum coke market in the AsiaPacific Region

bout 80% of the petroleum coke produced is used as energy source in various industries. Cement kiln and power plants are the chief end users. Most of the demand from the global petcoke market is now arriving from the East and the Middle East.

petroleum coke available in the market. Increasing investments, high electricity demand and growing population are some of the key drivers of the petroleum coke market in the Asia-Pacific Region.

Global Green Petcoke Trade

Major applications of fuel grade coke are found in power plants and cement kilns owing to high calorific value and less cost. According to CW Research, cement uses 26% of the global output of the green world

More than 100 refineries produce petcoke across the globe. Fuel grade coke and calcined coke are the two major types of

Top ten percent exporters and total share (Mt, 2010-2016E) US Taiwan

Venezuela Germany

Spain Indonesia

China Netherlands

Canada Other

India

2015

2016E

2010

2011

2012

Source: CW Research

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India Cement and Construction Materials Journal

2013

2014

petcoke with 35% share. Electricity uses 18% of world green petcoke.

economies such as China and India. In China, most of the petroleum coke is used

Top ten importers (2010-2016E) India Spain

China Canada

Japan Italy

Turkey Morocco

Brazil Others

Mexico

2010

2011

2012

2013

2014

2015

2016E

Global green petcoke trade grew by 6.1% between 2010 and 2016, while production increased by 3.6%

Source: CW Research

On CAGR bases, global green petcoke trade grew by 6.1% between 2010 and 2016, while production increased by 3.6 %. In 2016, trade reached the highest volume ever, expanding by 4.4% year-on-year to reach about 47 million tons. High demand for petroleum coke has been witnessed in Asia-Pacific Region over the past few years owing to developing

in power plants for generating electricity, whereas in India most of the petroleum coke is used in cement kilns owing to rapid industrialization and increased population. Tendency for using petcoke as the primary fuel or partially replacing coal with it is gaining momentum among end-users in the country. The growing affinity is due to superior fuel properties

and competitive prices of petcoke. India uses 70% of petcoke and is the second largest petcoke consuming country in Asia, after China, and it is the largest importer in the world. In India, petcoke has been the strongest growing petroleum product reflecting a trend of shift by cement companies away from coal towards petcoke.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

feature Europe is the second highest importer of petroleum coke because of the rise in demand of electricity in the region. Many crude oil refining companies had established delayed cooking units to produce petroleum coke domestically. Even in the Middle East and Latin America, considerable demand for petroleum coke exists because of rising population and increasing infrastructure developments in the regions. When comparing growth of petcoke production with the growth of exports, it is possible to verify that there is a very different growth. Petcoke exports grew at a much faster pace than the production of this component. In 2015, exports increased by 35% and production only improved by 2.3%. US dominates the main petcoke trade routes moving the commodities to India, Japan, and China. The main trade route is from US to Asia-Pacific. More specifically,

The ten largest exporters of petcoke in the world represent almost 96 percent of the total trade volume of petcoke in 2016

almost 30 percent of the global trade of petcoke happened on this route, while 23 percent of the trade happens on the route from US to Med Basian. The US AsiaPacific trade volume recorded in 2015 doubled, when compared to 2010.

Top exporters of petcoke in the world

The United States continues to be the largest exporter of petcoke in the world, with exports from the Gold Coast reaching India, Turkey, Brazil as well as Spain. From the West Coast, exports reach Japan and China, with Japan having imported more than 3 million tons in 2015, from the port of Los Angeles. The ten largest exporters of petcoke in the world represent almost 96 percent of

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India Cement and Construction Materials Journal

the total trade volume of petcoke in 2016. Among these exporters, Venezuela is the largest, mainly exporting to Med Basin and South America. In 2016, Venezuela's exports of green petcoke declined due to numerous problems. Venezuela's exports of petroleum coke, derived from the country's heavy oil, have been halted at its Petrosanfelix terminal and frequent outages and logistics problems have created an accumulation of tons of petroleum coke at PDVSA's Eastern terminals. Between 2010 and 2016, Venezuela volumes fell by 10 percent, while Spain increased by 40 percent. Spain is now on the fast track to becoming the second largest exporter at the global level.

around 8 million tons of petcoke. Its main source of petcoke is the US, from where India purchases around 60 percent of its imports. Other larger importers as Turkey reached 5 million tons of imported petcoke in 2016. China showed import figures similar to those of Turkey, as well as Japan and Mexico. Much of the growth in world in the consumption of petcoke is projected for the emerging economies of Asia, the Middle East, and Africa, where strong economic growth and rising populations increase the demand for this fuel. The increase of petroleum coke production is a natural consequence of the increase of oil API degree, currently available in the international market. Thus, it is expected that during the year 2017 the production of petcoke will remain at the same levels and that exports will reach new values.

Petcoke imports into India

As far as imports are concerned, growth seems to have become synonymous to the petcoke market in India. The demand for petcoke in the country has been rising remarkably during the last few years indicating that it will grow further. The growing affinity is due to superior fuel properties and competitive prices of petcoke.

India is the main importer of green petcoke with a total share of 30.8% of the global exports in 2016. Between 2010 and 2016, India is expected to be the country with the largest percent change, with volumes expected to expand at a CAGR of 56.0% by the end of 2016 India doubled its import of petcoke volume in 2016, compared to 2015, when it imported

Already in India, the petroleum coke sector is undergoing momentous changes. Crude price growth has had a knock-on effect on related commodities such as petroleum coke and diesel, sending import prices higher. Still, the country is expected to remain the major importer of this fuel. The expected growth in demand for petcoke will thus trigger inflow of more imports into India as the demand and supply gap is set to widen further

In 2016 India has become one of the main importers of petcoke. While coal imports were down 20 million tons in 2015, petcoke imports nearly doubled to 10.5 million tons. In 2016, petcoke imports have increased in price from USD 72.13 per ton in July to USD 95.75 per ton, up 33 percent. Coal imports have also grown more expensive, rising 43 percent in the same period to stand at USD 72.23 per ton. Between 2010 and 2016, India's petcoke imports improved by 56 percent, reaching 15 million tons of petcoke.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

CEMENT MARKETS

CW Research

CEMENT VOLUMES

Pakistan cement consumption decreased by 2.6 percent to 3.2 million tons in December 2016. Even though cement demand slowed down in the last month of the year, the country’s sector has been very focused on large government projects as it increased its consumption by 6.7 percent, year-on-year.

30%

-3%

Cyprus

Vietnam

Argentina

Belarus

Ukraine

Peru

India

-33%

Colombia

-23%

-30% Russia

-13%

Saudi Arabia

10% -10%

Source: CW Research

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Pakistan

50%

Cyprus

December 2016 cement production – YoY change (%)

Argentina

December 2016 cement demand – YoY change (%)

In India cement production reached 22.0 million tons in December 2016, a 7.9 percent decrease when compared to the same period in the previous year and a 7.2 percent increase monthon-month. Indian cement companies recently saw a currency demonetization, which caused some mixed feelings towards its consequences. Cement companies in the North of India are expecting to be affected in their cement volumes and results and in the south, the expectations are expected to be contradictory.

Peru

Cyprus cement production rose by 50.8 percent in December, the highest output increase of the selected countries for that month. Cement output reached a total of 0.1 million tons in December, a 20.4 percent increase when compared to the previous month. Cement demand in the country did expand in the same proportions as production but also showed a positive performance in a year-on-year

Overall in Asia, country’s cement sector continues to be pressured by high competition in prices, oversupply and demand slowdown.

Colombia

Cement consumption reached a total of 4.3 million tons or a 3.6 percent improvement month-on-month. On a year-onyear perspective

In Saudi Arabia, both production and consumption increased month-on-month. The country’s cement output stood at 4.4 million tons in December 2016, a 4.3 percent expansion when compared to the previous month. Cement consumption reached a total of 4.3 million tons or a 3.6 percent improvement month-onmonth. On a year-on-year perspective, these figures showed, however, a decline of 22.8 percent and 25.1 percent, respectively. Saudi Arabia’s dull cement consumption is letting cement stockpile to be maintained at high levels and cement companies to show losses in profit in the year of 2016.

perspective, by increasing 4.3 percent to 0.05 million tons. This figure however, is a decline of 24.6 percent when compared to the previous month. Therefore, the country seem to have been setting strengths to export its products, while the rest of the Med Basin region continues to see an overall negative trend in production and demand and trade of cement.

Saudi Arabia

In Middle East, cement producers continue to face negative performances in the cement sector. The region’s cement demand has been sluggish during all the year of 2016 and is expected to continue dull in the coming months. However, cement producers continue to gather strengths to export more cement to the African countries.

CW Research

CEMENT PRODUCTION (million tons) Country

MoM (%)

CEMENT CONSUMPTION (million tons) YoY (%)

YTD

YTD (%)

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT PRODUCTION MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

YTD (%)

CEMENT CONSUMPTION MOM (%)

CEMENT EXPORTS (million tons) Country

CEMENT MARKETS

Volume variation analysis for selected countries that are major consumers, producer, importers and exporters of cement. This is a selection of notable markets. Additional detail is available from CW Research.

CEMENT IMPORTS (million tons) MoM (%)

YoY (%)

YTD

YTD (%)

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT EXPORTS MOM (%)

YTD (%)

CEMENT IMPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

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

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CEMENT ENERGY MARKETS

CW Research

Energy Prices Update COAL: The average coal price for December 2016 closed at $89.80 per ton, increasing 68.1 percent YoY as

compared to December 2015’s price of $53.43 per ton. It increased by 3.6 percent when compared to November 2016’s price of $86.70 per ton.

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

Colombia exported

Australia Newcastle

Indonesian HBA

South Africa Richards Bay

120 110 100 90 80 70

Global trading volumes for six major coal countries decreased to 77.52 million tons in October 2016, dropping by 3.6 percent compared to September 2016’s 78.18 million tons.

60 50 40

Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec ’12 ’13 ’13 ’13 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’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 the six major coal countries decreased to 86.30 million tons in December 2016, growing by 6.5 percent in comparison with the 81.02 million tons recorded in November 2016. An increase in coal trading volumes occurred in Australia, Indonesia, Colombia and the United States, while Russia and South Africa all showed volume decreases in the month of December.

PETCOKE: US petcoke exports increased by 25.6 percent to 2.69 million tons in December 2016 when compared to the previous month, and fell 17.4 percent as compared to December 2015. The US export price for petcoke for December 2016 closed at $71.53 per ton, increasing by 4.5 percent as compared to November’s price of $68.43 per ton and up 52.8 percent when compared to December 2015’s price of $46.81 per ton.

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

Rolling 12-month average

70 60 50 40 30 20

D ‘16

O ‘16

N ‘16

S ‘16

J ‘16

A ‘16

J ‘16

M ‘16

A ‘16

M ‘16

J ‘16

F ‘16

D ‘15

O ‘15

N ‘15

S ‘15

A ‘15

J ‘15

A ‘15

M ‘15

J ‘15

F ‘15

D ‘14

Source: customs data

NATURAL GAS: The US Henry Hub spot price traded at $3.59 per MMBTU in December 2016, up 40.8 percent as compared to November 2016 and growing 86.0

percent as compared to December 2015’s price of $2.34 per MMBTU. Price in Europe increased 12.0 percent MoM, reaching $5.50 per MMBTU in December 2016.

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

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Volume variation analysis for selected countries that are major importers and exporters of coal and petcoke. This is a selection of notable markets. Additional detail is available from CW Research.

COAL - EXPORTS (million tons) - Dec 2016 Country

MoM (%)

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

YTD

YTD %

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

YTD %

CEMENT ENERGY MARKETS

CW Research

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

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

PETCOKE - GLOBAL EXPORT PRICES (USD/ton) -

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

Country

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

MoM (%)

YoY (%)

YTD

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

MoM (%)

Dec 2016

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE Country

WWW.CEMWEEK.COM/SUBSCRIBE

YTD %

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

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

YTD %

NATURAL GAS PRICES MOM (%)

WWW.CEMWEEK.COM/SUBSCRIBE

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

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

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cement market and competition

arket and competition

Birla renames cement brand Birla Corporation renamed its Reliance Perfect Cement brand to MP Birla Perfect Cement. The renaming coincided with the brand’s introduction into the central India market after acquiring Reliance Cement.

Dalmia Cement acquires limestone deposit in Odisha Dalmia Cement secured a limestone block in the state of Odisha. The company was able to acquire the Kottameta limestone deposit on auction after placing the winning bid of 12.05 percent of total revenues returned to the state.

Adani Cement and Hira Cement were also on the race for the Kottameta block. Located in the Malkangiri district, the source of cement raw materials is estimated to hold 98.7 million tons of limestone. It will take around 40 to 50 years to deplete. The Kotametta block was auctioned at a G-2 level, which means that the company would directly get a mining lease.

Birla Corporation recently acquired Reliance Cement, increasing its capacity from 10 million to 15.5 million tons per annum. MP Birla Perfect Cement is produced in the Maihar cement plant, in the state of Madhya Pradesh, with grinding units at Kundanganj in Uttar Pradesh, and Butibori in Maharashtra. In order to promote the new brand, Birla Corporation will deploy onsite vans carrying the MP Birla Perfect Cement and manned with experts who will explain technical information regarding the production of this specific brand and cement product at the construction sites. Construction companies will be able to require these vans ask the company experts for further information on the product.

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Indian cement companies record lower margins Indian cement companies have witnessed a decline in margins due to an increase in fuel costs and a price decline, particularly in the southern and western markets due to the demonetization.

Fuel prices are not expected to decline over the next few months, likely signaling a continuing trend for the next fiscal year. Cement products’ prices have declined sharply due to the demonetization.

“Because of increasing Indian demand and maintenance works at refineries in the US, supply has tightened and this led to a steep increase in prices during the latter part of the year,” said an official.

Fuel accounts for at least 40 per cent of a company’s input costs and cement firms normally store enough to meet the requirements for 45 days.

India Cement and Construction Materials Journal

Ambuja Cement promoting cashless transactions across the country India-based Ambuja Cement has signed a contract with ICICI Bank to promote cashless transactions among business partners. The agreement will help the company’s business partners open accounts for business transactions.

Union Budget positive for cement industry The cement sector in India may benefit from several announcements made in the new Union budget for FY 201718, including a boost in rural income, infrastructure projects and plans to make housing more affordable. The new budget increased the value allocated to rural low-cost housing from INR 16,000 crore to INR 23,000 crore. This alone is anticipated to lead to an increase in cement demand of

Cement sector to bounce back in the next two years The Indian cement sector is likely to witness a slow recovery in demand after being affected by demonetization and higher raw material costs in the second half of the current fiscal. Several companies have revised their expectations to a five to six percent recovery in demand over the next two financial years. Some place growth expectations at 4 percent.

up to two percent. Funds allocated to urban housing increased by a merely INR 1,000 crore, a disappointing figure for those expecting a boost in affordable housing. There was some relief that the new budget would not include a clean cess on petcoke, which some estimated it could reach INR 400 per ton. Most cement manufacturers were expecting a reduction in excise duties in the new budget, yet ended up disappointed. The uptake in demand is expected to be slower due to the dependence on real estate sector and parallel economy. However, an increase in governmental housing programs should lift demand in the next few months, or even years, in some regions.

Ambuja Cement has launched a pan-India ‘Go Cashless’ campaign in the wake of demonetization of highvalue currency by the government. The campaign first went live on December 7th 2016, through a series of direct marketing techniques, such as text messages and WhatsApp shared videos, in order to create awareness on the various available cashless options, such as swipe machines and bank services. Through the campaign, the company has reached out to over 42,000 partners (retailers, contractors and masons) across India, and over 45 million via its educational radio campaign. The initiative has already helped several retailers to conduct cashless transactions. Ambuja and ICICI Bank will also launch an exclusive helpline to assist stakeholders on opening current accounts for regular business transactions.

There is no expectation of a double digit increase in demand due to demonetization impact, which will most probably last till the peak period, followed by the monsoon.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

cement M&A AND FINANCE

&A and finance

Indian cement companies undergoing several mergers and acquisition deals The Indian cement market recorded a major merger deal signed between Dalmia Bharat and OCL India in 2016. The companies valued the merger deal at around INR 10,000 crore. The deal will create the fourth largest cement maker in the county having an installed capacity of 25 million tons per year. After the restructuring deal is complete, Dalmia Bharat will change the name of Odisha Cement, which will be absorbed into the company. Meanwhile, UltraTech Cement and Jaypee Group merged assets in Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh for around USD 2.38 billion. UltraTech is also going to benefit through the acquisition of a four million tons per year cement grinding plant in Uttar Pradesh. The company will invest around INR 470 crore to complete the unit. The investment will increase UltraTech’s capacity to 91.1 million tons per year over the next few months.

JANUARY / FEBRUARY 2017

JK Lakshmi Cement’s net profit, income, improve during Q3FY2017 JK Lakshmi Cement achieved a net profit of INR 7.6 crore in the third quarter of fiscal year 2017. In the same quarter of fiscal year 2016, the company had a net loss of INR 0.57 crore. Between October and December 2016, the firm collected a total income from operations of INR 750.92 crore, compared

to INR 728.29 crore in the same quarter one year ago. The results were achieved in spite of depressed demand due the effect of demonetization and the consequent lack of liquidity in the market. JK Lakshmi Cement is currently expanding its Drug cement company in a project that is expected to be completed by March 2017. When it’s finished, the factory will have a capacity of up to 2.7 million tons of cement per year, an improvement from 1.8 million tons per year before the intervention.

JSW Cement to acquire controlling stake in Shiva Cement JSW Cement is interested in acquiring Odisha-based Shiva Cement. The company is preparing an open offer to acquire at least a 67.6 percent stake at Shiva Cement, including the 12.65 percent stake currently owned by ACC. The company aims to acquire the 35.6 percent stake held by Shiva Cement’s promoters, and is launching an open offer to buy an additional 32 percent in the Odisha-based company. Estimates place the acquisition at INR 97.2 crore. JSW Cement will also take over Shiva’s INR 65 crore debt. Shiva Cement has the capacity to produce 132,000 tons of cement per year, with plans to gradually expand to 2.6 million tons in several phases. Additionally, it holds several captive limestone mines and

India Cement and Construction Materials Journal

a surplus reserve of raw materials. Shiva is also equipped with surplus, modern equipment and has access to the Odisha market. Not only that, but the firm can also access the typical supply-deficit markets of West Bengal, Jharkhand and Bihar. JSW cement is also planning to set up a 1.2 million ton per year grinding unit in Odisha, as well as adding additional 2.4 million tons of capacity in West Bengal.

Birla acquires Reliance Cement

Birla’s revenues fall in Q3FY2017 During the third quarter, Birla Corporation’s revenues dipped 9 percent to INR 832 crore, while cement dispatches fell 11 percent, to 17.47 lahk tons year-on-year. This was due to the effect of the demonetization in the company’s main markets, in the North and Central India. Net profit dropped 85 percent on a yearly basis, from INR 13.99 crore in the quarter ending December 31 2015, to

INR 2.09 crore in the equivalent quarter in 2016. Total income from operations also decreased by over 8 percent year-onyear at INR 848.93 crore, after recording INR 923.47 crore in the previous year. The company attributed the fall in net profit to higher borrowing costs on the acquisition of Reliance Cements. Despite the fall in revenues, the EBIDTA during the third quarter remained virtually unchanged at INR 57.96 crore when compared to the same quarter in 2015.

Indian-based Birla Corporation has acquired Reliance Cement for around INR 4,800 crore. The corporation now has 100 percent of equity shares in the cement company. From August, the company became Birla’s wholly-owned subsidiary. Birla claims it has already invested INR 100 crore in Reliance Cement since the December quarter of the current fiscal year. Through this acquisition, an entirely new cement brand was launched in January, MP Birla Perfect Cement, with a special focus in the Central India market.

Jaiprakash Associates posts net loss in 3qfy2017

The cement is being manufactured at Reliance’s cement units, an integrated cement plant in Maihar (Madhya Pradesh), and grinding units at Kundanganj (Uttar Pradesh) and Butiburi (Maharashtra).

Jaiprakash Associates, an Indian company with interests in cement, posted a net loss during the third quarter of 2016-17. The company presented a net loss of INR 1,095.02 crore; compared to a net loss of INR 827.26 crore in the same quarter last year.

Birla also has cement manufacturing operations in Satna (Madhya Pradesh), Raebareli (Uttar Pradesh), Chanderia (Rajasthan), and Durgapur (West Bengal).

Also during October-December 2016, the company suffered a decline of 22.28 percent on its total income, which came down from INR 2,121.59 crore to INR 1,648.87 crore.

Birla’s total cement capacity rose from 10 million tons per year to 15.5 million tons per year after the acquisition.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

cement projects and expansions

rojects and expansions

Asian Precious Metals proposes new cement plant in Pakistan The UK-based company Asian Precious Minerals (ASM) wants to build a cement plant in Pakistan. The plant will be constructed in KhyberPakhtunkhwa and will cost around USD 400 million.

JSW Cement expanding production capacity in Bellary

strengthen its distribution network in highdemand potential areas throughout South India," said an official from the company.

India-based JSW Cement will increase its cement production capacity from 1.0 million tons per year to 3.4 million tons per year at its cement plant in Bellary. "The additional capacity will help JSW Cement to

The additional production facility is highly efficient and will produce high-quality cement. The company seeks to improve its market share and distribution networks.

According to the chief executive of APM Nadim Khan, he and his company “look forward to constructing a model, state-ofthe-art and environment-friendly cement plant.” Khan was received by the chief minister of KhyberPakhtunkhwa, Pervez Khattak. The All-Pakistan Cement Manufacturers Association estimates that utilization rates at cement plants in the country are currently above 90 percent.11

Malabar Cements preparing to expand capacity Kerala’s Minister for Industries A. C. Moideen said that the government is preparing a tender for an expansion of the company. The project will be conducted with the assistance of the Kerala Infrastructure Investment Fund Board. Malabar is currently operating at a utilization rate of 95 percent. With the new expansion, the company hopes to increase its share in the domestic market

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India Cement and Construction Materials Journal

and to cater the future needs of the country's infrastructure sector.

Ultratech Cement to install new Greenfield cement plant in Madhya Pradesh UltraTech Cement has approved the project for a new cement plant in Dhar, Madhya Pradesh.

Shree Cement setting up new cement unit in Karnataka

expected to come online by December 31, 2018. Investment in the new cement unit should be around INR 1,800 crore.

India-based Shree Cement has received permission from the authorities to setup an integrated cement plant in Kodla, Karnataka.

The company will fund the plant through internal accruals. The new unit will help in expanding the companyâ&#x20AC;&#x2122;s business.

The proposed cement plant will have a clinker production capacity of 2.8 million tons per year and cement production capacity of around 3 million tons per year. The capacity addition is

In a meeting on January 21, the companyâ&#x20AC;&#x2122;s board of directors approved plans for a new cement plant with the capacity for 3.5 million tons of cement per year. UltraTech Cement is already the largest manufacturer of ready-mix concrete, as well as grey and white cement in India.

Headquartered in Kolkata, Shree Cement has a production capacity of approximately 25.6 million tons per annum. The Company has operations in Rajasthan, Uttarakhand, Bihar, Haryana, Chhattisgarh and Uttar Pradesh.

Shree Cement to construct new silos at Orissa India-based Shree Cement has signed a Letter of Intent (LOI) with Petron Engineering Construction for civil work of building silos and other miscellaneous work at the Orissa Grinding project. The project is located in Chandrabali, Shyampur District, Cuttack, Orissa and the contract value is evaluated at INR 33 crores.

In September 2016, Petron Engineering Construction had also received a similar letter from Shree Cements to perform civil works at its cement plants in Aurangabad, Bihar and Gulbarga, Karnataka for a total contract value of INR 500 million.

MCCL inaugurates modernized plant India-based Mawmluh Cherra Cements (MCCL) has started commercial production at modernized cement plant. The new cement plant is likely to have a positive effect on the cement company. The cement plant is currently producing 8,000-9,000 metric tons of cement and has a total production capacity of 18,000 metric tons. Set up in the early 1960s, MCCL is the oldest public sector undertaking in Meghalaya and is also the only stateowned cement plant.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

cement volume & pricing

olume and pricing

Indonesia cement production rises in 2016 In the first 11 months of 2016, Indonesian cement exports surged by 52.2 percent year-on-year. The country exported 1.5 million tons of cement, compared to 1.02 million tons in 2015. Next year, forecasts point to a further increase to 1.8 million tons. Also between January-November 2016, cement sales reached 56.5 million tons, a 2.8 percent increase year-on-year. In 2016, the utilization rate in the cement sector is estimated to have fallen to 65 percent, after recording 76.9 percent in 2015. In November alone, sales stood at 5.7 million tons, down 5.4 percent compared to October and a further decline of 5.3 percent compared to November 2015. While the construction sector remains flat, November was particularly slow due to heavy rains.

JSW cement to boost production capacity in Bellary India-based JSW Cement will increase its cement production capacity from 1 million tons per annum to 3.4 million tons per annum at its cement plant in Bellary. "We are increasing the cement manufacturing capacity from current 1.0 MTPA to 3.4 MTPA. The additional capacity will help JSW Cement to strengthen its

The additional production facility is highly efficient and will produce high-quality cement. The company seeks to improve its market share and distribution networks.

Sagar Cementâ&#x20AC;&#x2122;s production contracts YoY in December

Pradesh, India. The plant is based on Dry Process Rotary Kiln Technology.

India-based Sagar Cement recorded a five percent decline in cement production to 160,988 metric tons in December 2016, as compared to the same period a year earlier. The consolidated cement sales declined slightly to 154,196 metric tons in December 2016, as compared to 154,757 metric tons sold in the same period a year earlier. Sagar Cements is one of the most modern mini cement plants in the state of Andhra

JANUARY / FEBRUARY 2017

distribution network in high-demand potential areas throughout South India," said an official from the company.

India Cement and Construction Materials Journal

Cement companies may benefit from cost benefits Indian cement companies are likely to benefit from cost benefits in the market.

Cement market in Saudi Arabia facing pressures The Saudi cement market remains burdened by low demand. During January, cement sales fell 16 percent year-on-year and grew 11.3 percent month-on-month to 4.78 million tons. Yanbu Cement was the largest manufacturer in terms of cement sales in the country, with a volume of 633,000 tons, up from 630,000 tons in January 2015 but down by 15.1 percent compared to the 746,000 tons in the previous month. Yamama cement sold 369,000 tons, down from 551,000 tons in January 2015 and from 374,000 tons in December 2015. City Cement achieved sales of 355,000 tons; up by 22.4 percent compared to the 290,000 tons sold January 2015 and by 13.8 percent from 312,000 tons in December 2015.

Riyadh Cement sold 304,000 tons, a yearon-year decrease of 15.6 percent and a month-on-month grow of 20.6 percent. Arabian Cementâ&#x20AC;&#x2122;s sales ascended to 375,000 tons, 15.1 percent down onmonth and 0.5 percent up compared to January 2015. Saudi Cement sold 552,000 tons, less 20.7 percent on-year and 0.7 percent more on-month. Clinker production fell by six percent year-on-year, while increasing eight percent month-on-month, ending January at 4.24 million tons. Local manufacturers will likely remain cautious. Stockpile remain at high levels, ascending to 29.6 million tons, roughly 55 percent of total consumption in 2016. In this situation, companies will likely continue with their discounts, especially in the Central and Western region.

Ambuja cement has a positive outlook for 2017 India-based Ambuja Cements, a unit of LafargeHolcim, expects demand to pick up after June as a aftermath of demonetization. The demand growth had slowed down since November 2016. The production volumes increased by seven percent in January to October 2016. The demand is expected to pick-up after two quarters. The company has encouraged its 42,000 distributors and contractors to open business accounts with banks, and bought more than 5,000 point-of-sales machines for its retail outlets.

The company expects government infrastructure projects, low cost homes and digital payments to boost sales and restore demand.

The cement volumes continued to remain below its long-term averages in many regions â&#x20AC;&#x201D; with the expectation that it would finish with a below-normal growth of 3 per cent in FY17 (thanks to demonetization). Some cement companies, including UltraTech Cement, ACC, Ambuja Cement and Shree Cement, recorded a 14.1 percent increase in sales in the six months ending September 2016, on annual basis. The net profit increased by 73 percent on a year on year basis. The top four cement companies managed to improve their net profit by 20 per cent or more during the period. The cement companies benefitted from lower power and fuel costs as well as that of freight remained unchanged. Several companies substituted coal with petcoke as a fuel, which reduced the fuel costs reduced considerably.

Jaiprakash Associates posts net loss in 3qfy2017 Jaiprakash Associates, an Indian company with interests in cement, posted a net loss during the third quarter of 2016-17. The company presented a net loss of INR 1,095.02 crore; compared to a net loss of INR 827.26 crore in the same quarter last year. Also during October-December 2016, the company suffered a decline of 22.28 percent on its total income, which came down from INR 2,121.59 crore to INR 1,648.87 crore.

India Cement and Construction Materials Journal

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cement news

egional news

Pakistan: Cherat cement announces expansion plans

Nepal delays cement grading process

Pakistan’s Cherat Cement plans to install a third production line in Nowshera, Khyber-Pakhutankhwa. The new plant would have an annual production capacity of 2.1 million tons, taking the company’s total output to 4.5 million tons a year, about 10 percent of the current installed production capacity in Pakistan. Meanwhile, the company is already working on its second production line that would have a capacity 1.3 million tons, which was expected to come online in the second half of 2016-17. Cherat Cement’s latest expansion plan will be entirely financed by debt, costing close to PKR 13 billion. The financial close is expected in the next couple of weeks and the production line may become operational by the second half of fiscal year 2020. The company also intends to bring another Waste Heat Recovery along with the new line. The move is expected to help the company to improve its market share in the company.

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Nepalese government has delayed the cement grading process, which was expected to begin some time ago. “It is true that the grading process for domestic cement brands has been delayed and we have not been able to arrange a meeting of the NBSM technical committee to finalise the quality certification draft. It is due to the busy work schedule that NBSM employees have at present,” Bishwo Babu Pudasaini, director general of NBSM.

According to Pudasaini, “NBSM has finalised quality parameters for cement under all aforementioned three grades. Domestic cement brands are currently categorized as Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC) and both types of cement are labeled under 33 grade cement.” The existing government policy doesn’t allow the cement producers to grade the products higher than 33-grade. However, the cement producers claim that the cement produced is on international standards.

India's Keerthi industries operates waste eat recovery unit Keerthi Industries has successfully deployed a new waste heat recovery project associated with its cement manufacturing process. The unit has a 2.24 megawatts capacity from waste heat and flue gases byproduct of cement manufacturing. It has been producing electricity since December 15, 2016.

India Cement and Construction Materials Journal

The facility cost INR 25.82 crore, including INR 12.49 crore of imported equipment and INR 13.33 crore in locally-produced machinery. With its new power unit, Keerthi hopes to reduce dust levels, temperature, and flue gases’ emission from its cement division.

Cherat Cement improves net profit and earnings in 2016 Pakistani manufacturer Cherat Cement Company posted a higher net profit during the December 2016 quarter, reports The Tribune.

Pakistan exports less cement in 1hfy2017 Pakistani cement exports fell during the first seven months of fiscal year 2016-17.According to figures from the All-Pakistan Cement Manufacturers’ Association, between July 2016 and January 2017, Pakistan exported 3.44 percent less cement compared to the same period a year before. Exports to Afghanistan fell by 10.88 percent year-on-year during that period

while exports to India soared 79.34 percent. Exports via seaports suffered a decline of 19.23 percent year-on-year. In January alone, cement exports to Afghanistan fell by 4.5 percent year-onyear, from 174,000 to 166,000 tons, while exports to India jumped 77 percent from 49,000 to 861,000 tons. Exports of cement to India are done mostly by land in the Wahga border and by coastal shipping through the southern coast of India.

Lucky Cement’s profit rises in 2016 Pakistan-based Lucky Cement recorded a 12.5 percent increase in profit to PKR 1.04 billion in 2016, as compared to the same period a year earlier. The net sales increased by 7.5 percent to PKR 23.4 billion in 2016, as compared to the same period a year earlier.

On a consolidated basis, Lucky Cement reported a net profit of PKR 8.12 billion for the year ended December 31, 2016 which is 13.3 percent higher compared to the same period last year.

The increase corresponds to a jump of 52 percent year-on-year. In the two last quarter of 2016 combined, Cherat’s earnings reached PKR 1.02 billion, against PKR 676 million in the same half of 2015, a growth of 51 percent. During that period, its gross margin improved from 3.04 to 4.41 percent thanks to cheaper coal and efficiency of the recently commissioned production line. Forecasts were widely surpassed, since they had predicted earnings of PKR 399 million for JuneDecember 2016.

Fauji Cement constructing captive power plant The Pakistani cement manufacturer Fauji Cement will install a 7.6 megawatt captive power plant.

The domestic sales increased by 23.2 percent to 2.98 million tons in 2016, as compared to 2.42 million in the same period a year earlier.

Cherat Cement installing a new third line of production in Pakistan

In the closing quarter of 2016, the company declared a net profit of PKR 621 million, up from PKR 408 million in the same period a year before.

Pakistan’s Cherat Cement plans to install a third production line in Nowshera, Khyber-Pakhutankhwa.

The company will invest around USD 235 million in the unit. Meanwhile, the company is already working on its second production line that will have a capacity of 1.3 million tons. It was supposed to be commissioned in the second half of 2016-17.

The Greenfield cement plant will have production capacity of 2.1 million tons.

The move should help the company to improve its market share in the country.

The new plant will be constructed by an undisclosed Chinese company. It will generate electricity through waste heat recovery. It represents a total investment of USD 8 to 10 million, expected to be completed by March 2018. The plans for the new captive power plant were approved by a board meeting on December 9. The plant will be adjacent to the line-I of the cement factory in the district of Punjab.

India Cement and Construction Materials Journal

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cement PEOPLE

eople

LafargeHolcim announces executive changes LafargeHolcim announced executive changes as it nears the last stage of divestment plan. The company appointed Pascal Casanova, currently responsible for the Latin America Region, as the new responsible for North America and Mexico region. Roland Köhler, currently responsible for the Europe Region will add Australia, New Zealand and Trading to his responsibilities. Meanwhile, Martin Kriegner, currently responsible for LafargeHolcim’s Indian business, will join the Executive Committee and take additional responsibilityCement for South appoints East Asia. Burnpur Oliver Osswald, currently responsible Saurabh Ganguly as for the operations in Argentina, brand ambassador will join the Executive Committee Burnpur Cement Ltd announced that with responsibility for Central and they signed an agreement with Saurabh South America. In addition, Alain Ganguly, Former Captain of Indian Bourguignon and Ian Thackwray have Cricket Team, to act as the Brand decided to resign. Ambassador for a period of three (3) years, effective from March 11, 2016. Under the agreement, Mr. Ganguly as the Brand Ambassador of the Company will endorse the product and brand of Burnpur Cement which may help in increase of sales of the Company.

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India: Jaiprakash associates appoints nominee director

Accordingly, Shailesh Verma is nominated by State Bank of India as Director on Board of the Company from 26 December 2016.

India-based Jaiprakash Associates has received note from State Bank of India, revising the date of appointment of Shailesh Verma, reports Business Standard. The bank moved Verma’s appointment date from 07 December 2016 to 26 December 2016, as he did not have a DIN.

ACC appoints interim MD & CEO The Arabian Construction Company has appointed Neeraj Akhoury as Managing Director and CEO of the company. The board has also reluctantly acceded to the request of Harih Badami to step down as the Chief Executive Officer and Managing Director. Accordingly, the board has accepted his resignation and relieve him from February 4, 2017 To ensure smooth transition, Badami has volunteered to advise and support the new Managing Director and he will continue his association with the company until June 30, 2017. A steel and cement veteran, Neeraj Akhoury was the CEO of Lafarge Surma Cement and Country representative of LafargeHolcim Bangladesh. He started his career with Tata Steel in 1993 and joined the LafargeHolcim Group in India in 1999.

India Cement and Construction Materials Journal

Arabian Construction Company is India's foremost manufacturer of cement and ready mixed concrete with 17 modern cement plants, more than 50 ready mixed concrete plants, a vast distribution network of over 9,000 dealers and a countrywide spread of sales offices. This company is a leading construction firm in the Middle East and North Africa region and has constructed some of the most impressive high-rise buildings.

orders & equipment highlights

rders & equipment

India: Khrew cement plant will be modernized Jammu and Kashmir Cements (JK Cements) will upgrade its Khrew cement plant. The plant will be modernized, following a direction issued by the Committee on Public Undertakings of the Jammu and Kashmir Legislative Assembly. During the meeting of the committee, Shailendra Kumar, commissioner secretary for industries and commerce, briefed those present on the overall functioning of JK Cement and the possible ways of improving the institution. Among those attending the meeting were the managing director of JK Cement and several senior officers of concerned departments. The upgrade would see retrofitting of the existng kilns and the addition of a precalciner, modern clinker coolers as well as new kiln drives ID fans and motors. The cost is estimated at INR 3,000 million. The Khrew plant was established in 1981 with a cement capacity of 600 ton per day. In 2006 the works capacity was doubled to 1,200 tons per day.

Aumund supplies 108 machines for Greenfield project in Beni Suef In June 2016, Sinoma International Engineering announced that its subsidiary, Chengdu Design & Research Institute of Building Materials Industry (CDI) had signed a contract with the Egyptian government to build six production lines for clinker of 6,000 tpd each, in Beni Suef. Aumund Fördertechnik, in close cooperation with its Chinese subsidiary Aumund Beijing, has now won the order to supply the clinker conveying equipment for the project.

The machinery package also includes four BWG-L belt bucket elevators (170 t/h) one BWZ-L chain bucket elevator (80 t/h) as well as six pan conveyors (375 t/h), for each of the six lines. The new Greenfield project in Beni Suef is to be fully completed within the next three years. The pilot phase of the new production lines is due to start as early as December 2017. Aumund Fördertechnik will supply these 108 Machines to Egypt in three deliveries, between April and June 2017.

Egypt, with a capacity of 70 million tonnes, is one of the world’s biggest producers of clinker. Around 52 - 54 million tonnes of cement are consumed annually in Egypt. The identical lines will each be equipped by Aumund with four BWG belt bucket elevators, with capacities up to 650 t/h and three BWZ chain bucket elevators (up to 550 t/h).

FLSMIDTH to supply equipment to maple leaf cement

FLSmidth will supply a complete cement production line to Pakistan-based Maple Leaf Cement.

a production capacity of 7300 tons and will be setup in Iskanderebad, Pakistan. The scope of supply includes crushing, packaging and loading. The company will also supply plantary gears, MAAG Gear, bag filters and automation system.

The deal is valued at around SEK 557.7 million. The new equipment will have

The deal is expected to have a positive impact on the company operations.

India Cement and Construction Materials Journal

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CONSTRUCTION BUILDING MATERIALS BY BMWEEK.COM

onstruction & building materials by bmweek.com Researchers develop eco-friendly concrete

Chinese building materials sector grows in 2016 The building materials sector in China had an uptick in 2016 due to the growing housing market, reports China Daily. Interest rate cuts and lower deposits helped the property sector to develop and grow throughout the year. Cement output rose 2.5 percent yearon-year to 2.4 billion tons in 2016, compared with 4.9 percent drop in 2015. Output of flat glass increased 5.8 percent in 2016, compared with an 8.6 percent decrease in 2015. Investment in real estate development grew 6.9 percent year-on-year in 2016, 1.1 percentage points faster than in the first three quarters, and 5.9 percentage points faster than 2015. The real estate sector's recovery, however, has been uneven from city to city, with economically strong areas reporting drastic price rises, and less developed areas still reporting huge inventories of unsold houses.

New Jersey-based Rutgers University researchers have developed energy-efficient technology that could further develop wide-ranging composite materials, making them stronger, lighter, cheaper and greener. Richard Riman, a professor in the Department of Materials Science and Engineering in the School of Engineering, developed the technology that harnesses largely low-temperature, water-based reactions, allowing the team to do things in water that were previously made at temperatures well above those required to thermally decompose plastics. “Typically, we don’t go any higher than 240 degrees centigrade (464 degrees Fahrenheit) to make the composite materials,” Riman said. “A lot of these processes are done even at room temperature.” The technology has been used to make more than 30 different materials, including concrete that stores carbon dioxide. Other materials include multiple families of composites that incorporate a wide range of metals, polymers and ceramics whose behavior can be processed to resemble wood, bone, seashells and even steel. “The first thing we did was show that we could make a material that costs the same as conventional Portland cement,” he said. “We developed processing technology that allows you to drop the technology right

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India Cement and Construction Materials Journal

into the conventional world of concrete and cement without having to make major capital expenditures typically encountered when a technology is disruptive to the marketplace. We plan to do the same thing in the advanced materials business.” Riman, who has taught for 30 years in the Department of Materials Science and Engineering, focuses on making ceramic materials under sustainable conditions. That means low energy with a low carbon dioxide footprint. The professor created a concrete product company, Solidia Concrete. Along with Solidia Cement, they can reduce the carbon footprint of cement and concrete by up to 70 percent and can save as much as 528.3 billion gallons a year. The company produces concrete-based products such as roofing tiles, cinder blocks and hollow core building slabs.

Qatar ministry and researchers develop new building block

UAE: Arkan Building Materials annual profit tumbles Based in Abu Dhabi, Arkhan Building Materials reported a 25 percent decline in profits for the whole of 2016, as market pressure on prices caused revenues to tumble. Net profit reached AED 75.7 million, after standing at AED 101.1 million, in part due to damage from the heavy rainstorm that hit the United Arab

Emirates in March 2016. Pressure on market prices for products caused revenue to decline to AED 807.7 million, compared to AED 876.9 million in 2015. In order to cut costs, the company is temporarily consolidating the production and sales of cement in a single location, most likely the factory in Al Ain. The company is the parent of Emirates Cement Factory, Emirates Blocks Factories, Anabeeb and Al Ain Cement Factory.

Construction material prices increase consecutively in the US Construction material prices in the United States increased 1.0 percent month-on-month in January after a slight bump in December, reports Construction Dive. This was the second consecutive month that prices saw an uptick.

Material prices rose 3.8 percent year-onyear, the fastest increment since the offset of 2012. Global demand for materials has increased, particularly in China. However,

US: Martin Marietta’s net sales grew in fourth quarter

US-based building materials company Martin Marietta reported net sales of USD 889.0 million for the fourth quarter of 2016, compared to USD 780.8 million in the equivalent quarter of 2015. EBIDTA was USD 229.7 million, compared to USD 204.4 million year-on-year. For the full year, net sales were USD 3-58 billion, compared with USD 3.37 billion in 2015, while EBIDTA reached USD 971.6

the US market could also see greater growth and influence in prices in the coming months due to greater business investment. Energy prices also played a key role in the overall price gains, with the 23.6 percent gain in natural gas prices in a monthly basis. Unprocessed energy prices also rose by 6.7 percent in the same period, while crude petroleum prices dipped 5.5 percent in January.

million, compared to USD 750.7 million in the previous year. “Looking ahead, we expect continued and accelerating growth in all three of the Company’s primary construction enduses, and our leading market positions will allow us to continue benefiting from these opportunities in 2017 and beyond. We are highly confident that a durable, multi-year construction recovery is now underway, consistent with thirdparty forecasts,” said Martin Marietta’s President and CEO, Ward Nye.

VegeBlock, a new innovative building block designed to help increase sustainability across the country’s construction segment, was created by TRL and the Qatar’s Ministry of Municipalities and Environment. The product, also known as Smart Block, represents the latest stage in an ongoing program of collaborative work between the ministry and the global center for innovation in transport and mobility. It aims to improve the sustainability and adoption of green construction in Qatar and throughout the region. The VegeBlock was developed from small scale samples produced in laboratories to full-size building blacks using materials and techniques suited for the Gulf region. The VegeBlock is composed entirely of recycled aggregates (limestone) and used vegetable oil in a similar way to conventional concrete blocks, and has properties that nearly match low-strength concrete. It’s suitable for use as non-load bearing blocks in buildings. Similar projects had previously focused on the use of locally available recycled and secondary aggregates instead of imported primary aggregate. The country is set to take production of the construction material to full scale and release a Best Practice Guide for its reproduction. According to a preliminary economic analysis, the production costs of the VegeBlock could be significantly lower than concrete blocks, at around two thirds of the price.

India Cement and Construction Materials Journal

JANUARY / FEBRUARY 2017

PETCOKE PRODUCTION, SHIPPING AND PRICING BY PETCOKEWEEK.COM

etcoke production, shipping and pricing by petcokeweek.com

INDIA: PETCOKE CONSUMPTION DROPS FOR THE FIRST TIME IN MORE THAN A YEAR Petcoke consumption fell 9.9 percent year-on-year in India, reaching 1.95 million tons in January. Oil demand in the country fell the most since May 2003 due to the continued demonetization impact in the USD 2 trillion Asian economy. Fuel consumption fell 4.5 percent to 15.5 million tons in January, after recording sales of up to 16.2 million tons in the same month of the previous year. Diesel use, which accounts for around 40 percent of total fuel demand in India, dropped by 7.8 percent, at 5.8 million tons, the steepest decline since September. Gasoline consumption also had its sharpest contraction since June, reaching 1.8 million tons, or a decrease of 0.6 percent. Liquefied petroleum gas use, however, expanded by 16.4 percent to 2 million tons, while jet fuel demand rose 17.8 percent to 627,000 tons.

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CW Research: US uncalcined petcoke production falls in August Green petcoke output in the US during the month of August saw a 2 percent decline MoM, but grew 7 percent when compared to August 2015. YtD data also shows an improvement of 5 percent. In August, green petroleum coke output in the United States suffered a monthly contraction of 2.0 percent, from 10.5 million tons in July to 10.3 million tons in August 2016. Yearly, the country witnessed an expansion of 6.5 percent, having recorded an output of 9.7 million tons. The first eight months of 2016 recorded a total production volume of 78.6 million tons, a 4.7 percent growth when compared to the January-August period of the previous year, which recorded a total output of 75.0 million tons. In the East Coast, there was a monthly increase of 1.4 percent from 393,896 tons in July to 399,568 tons in August 2016. Year-on-year, output improved 1.5 percent, having recorded 393,541 tons in August 2015. In the Midwest region, the unclaimed petroleum coke output in August 2016 was recorded at 2.2 million tons, a 4.6 percent increase from the 2.1 million tons registered in July 2016, and an 11.9 percent surge year-on-year.

India Cement and Construction Materials Journal

The Gulf Coast saw a month-on-month contraction of 3.6 percent, from 5.9 million tons to 5.7 million tons in August 2016. Yearly, production saw a 3.8 percent improvement from the recorded 5.5 million tons in August 2015. Total green petcoke output from the Rocky Mountain region in August 2016 reached 265,552 tons, a 10.5 percent decline when compared to July 2016â&#x20AC;&#x2122;s 296,751 tons. From August 2015, there was a 13.1 percent improvement, recording a volume of 234,707 tons. In August 2016, petcoke output in the West Coast was 1.7 million tons, dropping 3.6 percent when compared to the previous months, which recorded an output of 1.8 million tons. In the equivalent month of the previous year, output reached 1.6 million tons, meaning a growth of 9.5 percent.

INDIA: DECREASING PETCOKE IMPORTS AFFECTING FREIGHT RATES The Atlantic Supramax market is being affected by sluggish petcoke inquiries from India. This comes to add to the mounting pressure from the tonnage accumulating in the region.

CHILE: PETCOKE PRODUCTION RISES IN DECEMBER 2016 Petcoke and other refining and oilderived products saw their output rise 5.7 percent month-on-month in December.

industry declined 2.1 percent, mostly due to a 4.7 percent decline in food processing production. Commerce inventories also fell 4.0 percent, with retail slipping 10.5 percent, while wholesalers saw a 1.8 percent decrease month-on-month.

he Chilean oil-based production was one of the few positive sectors in the country’s industrial production. In the same month, output in the overall

Copper mining inventories also dropped 2.8 percent, due to a contraction in the inventories of copper mining products, which fell 3.2 percent monthly.

India: New delayed coker unit commissioned at Barauni Refinery Indian Oil and Engineers India developed a Delayed Coking technology in a joint partnership, which was implemented in the 600,000 metric tons per year Coker-A unit at the Barauni Refinery, in India.

The new unit is on par with international standards of enhanced safety and reliability. This revamped equipment provides an enhanced yield of distillates and reduced coke yield.

The commissioning activities of the unit were successfully completed, with a feed cut to the coke drum on January 25 of 2017.

The Barauni Refinery is the first one in India to employ this new domesticallydeveloped coker technology.

HIGHER PETCOKE PRICES REDUCE CEMENT COMPANIES’ MARGINS

Demonetization is also greatly affecting the cement sector, with early estimates placing cement production at a modest growth of 4 percent in 2016-2017.

Petcoke prices have surged nearly 75 percent in the current fiscal year in India, pressuring cement companies’ margins and affecting their results. Diesel costs have seen a similar rise, lifting the companies’ input spending in FY2017. From the start of the financial year, petcoke prices have risen from USD 40 per ton to the current USD 60-70.

Previous estimates placed growth at 4-6 percent during this period.

The Houston to Krishnapatnam petcoke route in East Coast India, basis 50,000 metric tons slipped 25 cents on the previous Thursday, February 9, to USD 27.75 per metric ton. Petcoke demand rose in the second half of February and early March, but it has not materialized in firm spot cargoes yet. “There is no urgency to buy petcoke,” said a South Indiabased trader, adding that buyers had preferred to hold off purchases as prices were expected to drop further. A West India-based end-user said that the market is extremely sluggish with very limited demand, with most of the big cement companies covered in terms of inventory. He added: “Sales are down. The market has taken a hit due to demonetization. The first quarter of the year used to be one of our best quarters. Now it’s our worst.” Slowing grain traffic from the US Gulf Coast and East Coast, and South American soybean exports are not yet at full speed. Unemployed tonnage is also gradually accumulating in the Atlantic, which may hinder a recovery in freight rates, even if both grain and mineral demand improves in the coming month.

The impact of the demonetization is expected to have a greater effect in the real estate and construction sectors, which are strongly connected with the cement sector, along with steel.

India Cement and Construction Materials Journal

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analyst recommendations UltraTech Cement Axis Direct's research report on Ultratech Cement recommendations are to maintain our hold rating with target price of INR 3,500, 1 percent upside from CMP of INR 3,470. UltraTech’s reported standalone blended EBITDA of INR 11 billion in

Q3FY17, down 1 percent year-on-year was above consensus and our estimate of INR 10 billion. Beat was largely due to lower than expected decline in volumes. “We marginally adjust our FY17/FY18 EPS estimates to INR 102 and INR 137”.

India Cements Shrikant S. Chouhan, Senior Vice President of Technical Research at Kotak Securities recommends to buy India Cements and stop loss at INR 146 for targets close to about INR 180. “Stock has formed inverse Head and Shoulder pattern on monthly charts. It broke out of the neckline and then the demonetization effect hit the stock leading to correction. Since then, the stock has had a huge runup outperforming all the stocks in the sector. In the near term, the stock can go to 180 levels and in the longer term can even test 220 levels. One can buy the stock in 2 tranches, at current levels and can add more if it falls to 152-153 levels with a longer term target of 220.”

JK Lakshmi Cement Centrum is bearish on JK Lakshmi Cement. “As JKLC is operating at peak clinker utilization in north, we estimate its 5 percent volume CAGR during FY16-19 will be driven by higher sales in the eastern region. In the east JKLC is facing cost headwinds as well as weaker realization (owing

to ongoing expansions), moderating recovery in profitability. Amid ongoing capex to reduce power cost at its eastern operations, JKLC will also have to fund clinker expansion in the north to drive volume growth FY19/20 onwards. This will increase capex rate FY19E onwards and mute deleveraging. We maintain SELL with a lower TP of INR 340.”

Heidelberg Cement ICICI Direct recommended hold rating on Heidelberg Cement with a target price of INR 135 in its research report.

Mangalam Cement ICICI Direct's research recommendations were maintained to buy Mangalam cement with a revised target price of INR 340/ share. “We expect the EBITDA margin to improve from 4.1 percent in FY16 to 15.1 percent in FY18E. At the CMP of INR

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293, the stock is trading at an attractive valuation of 6.0x FY18E EV/EBITDA and an EV/ton of USD 42”. The company’s sales were strong in the northern region of the country, led by infrastructure spend by government, helping the company to maintain utilization.

India Cement and Construction Materials Journal

“We expect the EBITDA margin to improve from 12.6 percent to 16.3 percent in FY18E mainly led by cost efficiency and operating leverage benefit. Hence, although we remain positive on the stock from a long term perspective, near term challenges prompt us to maintain hold recommendation on the stock with a revised target price of INR 135”.

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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: March 3, 2017

World green petcoke market demand forecast (2021) Part 2

March 9, 2017

Global Cement Volume Forecast â&#x20AC;&#x201C; 1H2017 Update and Outlook

May 11, 2017

Global refractory market report

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BUZZ

LafargeHolcim announces executive changes

Reliance group acquired Birla cement

Diamond cement invests in a Greenfield cement plant

Vietnam: Siam cement to begin construction of new cement plant

Chinese government imposes new cement kiln co-disposal policy

New cement plant opens in Douala, Cameroon

Buzzi Unicem cement plants receive energy certification

10. Egypt: new cement plant in south Sinai

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imports russia

industrial activity

using

6. 7. 8. 9.

output

coke

materials results

results

India: Shree cement to go pan India India: Dalmia cement secures limestone deposit Indian cement sector may records lower volume India cement sector to experience downturn in 4qfy2017 India: JSW cement to boost production capacity in Bellary India: Maha cements inaugurates Greenfield cement plant India cement sector witnesses major M&A deals India: Ambuja cement signs contract with ICICI bank India: Ultratech cement to build new cement plant

region economic development

waste

investment

INDIA 1. 2. 3.

IRAN

refinery

decline exports

2. 3. 4. 5.

India: New delayed coker unit commissioned at Barauni refinery CW Research: Weekly cement market update CW Research: Weekly petcoke market update Tajikistan to produce more aluminum in 2017 CW Research: US uncalcined petcoke production falls in August Global energy & cement markets | January 2017 Thermal coal prices may rally again EIA predicts growth in coal output by 2018 India: Petcoke consumption drops for the first time in more than a year

products

LafargeHolcim restructures African operations

1h2016

recorded

power reach

short thermal volume

IRAN

petroleum

vietnam

CEMEX lends fund from BDO