India Cement and Construction Materials journal - ICCM 35

india A CemWeek Publication

issue 35

Cement

APRIL / MAY 2017

& construction Materials

Leaders Q&A:

Mahendra Singhi, CEO Dalmia Cement CW Research

Petcoke trends through 2021 Feature

Cement outlook in India 1H2017 Spotlight On

Possible ban of petcoke in India News

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Analysis

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Market Coverage

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Interviews

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People

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FEATURES

DEPARTMENTS

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EDITORIAL LETTER

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NUMBERS IN BRIEF

Leaders Q&A: Mr. Mahendra Singhi

Mahendra Singhi, CEO of Dalmia Cement, discussed the increased focus on sustainability and shared the expectations for the Indian cement industry

12 CW Research: Petcoke supply and demand trends through 2021

This is the second part of an article presented in the previous issue of ICCM where it will take a closer look at end-user trends and discuss the 2021 forecast prepared by CW Research

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Feature: India considering nationwide petcoke ban

The future is unclear about the usage of petcoke and furnace oil in the National Capital Region

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Article: India’s market strength to continue in the 1H2017

India is one of the countries where the cement sector is expected to show a strong growth

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Article: Ultratech Expansion

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Perspectives on cement industry in India

MARKET AND COMPETITION M&A and FINANCE PROJECTS AND EXPANSIONS VOLUME AND PRICING REGIONAL News PEOPLE orders and equipment BMWEEK PETCOKEWEEK

rOBERT MADEIRA cemweek publisher head of cw group research

Prices of cement to remain unstable in India

research and analytics 28 Cement Volumes 30 Cement Energy 48 ANALYST RECOMMENDATIONS

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Ultratech Cement is India's largest cement producer and has consolidated its position with the acquisition of Jayprakesh Associates' cement operation

Cement

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letter from editor

Expectations for the Cement Industry Perspectives on cement industry in India

he CEO of Dalmia Cement gave an exclusive interview to ICCM, where he shares his experiences in the cement industry, discusses the success of the company and presents his vision on the sustainability of the industry.

This April/May issue focuses on a study conducted by the CW Group on trends in the use of petcoke across the globe, as well as factors influencing demand. The cement sector will continue to sustain petcoke consumption across several regional markets. However, the cement sector's role on petcoke consumption will remain almost unchanged by 2021. Still on petroleum coke, this issue of ICCM presents an extensive article on the fact that the Indian Government is considering to ban petcoke nationwide.

This issue also covers CW Research’s Global Cement Volume Forecast 1H2017 update for India, which projects more than 7 percent year-on-year growth for 2017. The forecast thus proves the Indian market will be one of the main drivers behind the boost in the cement market in Asia ex-China.

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APRIL / MAY 2017

Elsewhere in this issue we look at the growth of Ultratech Cement, which has affirmed itself as India's largest cement producer and has consolidated its position with the acquisition of Jaiprakash Associates.

As usual, CemWeek 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 Prices of cement to remain unstable in India Following the negative impact of demonetization on construction and cement demand at the end of 2016, rising petcoke prices pose a new challenge to Indian cement manufacturers Ex-works prices spiked in the third quarter of the year, expanding by as much as 10 percent for Northern Indian manufacturers and reaching USD 68-70 per ton during the quarter. Yet by the end of 2016, ex-works prices across India stabilized at around USD 60-64 per ton. If for companies operating in the Northern market and Pan-Indian ones, pricing decreased between a range of -5 to -12 percent quarter on quarter, during the fourth quarter of the year, ex-works pricing in Southern India increased by around three percent, though fell by about eight percent.

India quarterly ex-works cement pricing (%) Ex-works Pan India

20%

Ex-works Northern India

Ex-works Southern India

10%

-10%

-20%

2Q2015

3Q2015

4Q2015

1Q2016

2Q2016

4Q2016

3Q2016

Source: CW Research

0%

Nevertheless, manufacturers are bracing for increased input costs, specifically due to an expected bump in petcoke pricing.

India Cement Retail Price (%) Series 1

3% 2%

0% -1% -2%

Jan '16

Feb '16

Mar '16

Apr '16

May '16

Jun '16

Jul '16

Aug '16

Sept '16

Oct '16

Nov '16

Dec '16

Jan '17

Source: CW Research

1%

The change in input prices is also likely to impact retail prices. In in January 2017, retail pricing fell by a marginal -0.3 percent across India, retail prices have increased in April 2017 in the Northern part of the country by around INR 10-15 per a 50-kilogram bag. O the other hand, in Southern India, prices mirrored the increase in the North, decreasing by the same value.

India Cement and Construction Materials Journal

APRIL / MAY 2017

3

Leaders Q&A:

Dalmia Cement CEO:

Mahendra Singhi

Cement sector has been playing a vital role in Indian economy

In an exclusive interview with India Cement & Construction Materials Magazine, Mahendra Singhi, CEO of Dalmia Cement, explained the secret of the company’s success, discussed the increased focus on sustainability and shared the expectations for the Indian cement industry.

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APRIL / MAY 2017

India Cement and Construction Materials Journal

India Cement and Construction Materials Journal

APRIL / MAY 2017

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Leaders Q&A: almia Cement has been in the market for more than 75 years.

Ever since, the company has been at the forefront of the cement industry, rapidly achieving success through the balance between economic growth and sustainability, according to Mahendra Singhi, Dalmia Cement CEO. Q: Dalmia Cement has been a leader in cement manufacturing in the past few years. What is the secret to the company’s success?

A: We have been at the vanguard of the industry since 1939, and are in the top quartile of cement manufacturers in India. While there are several attributes which define and drive us, the salient ones are: a deeply imbued sense of ownership, and therefore desire to excel, by each

employee. This is enabled by our practiced values, which promote innovation, teamplay, collaboration, speed, excellence and leadership. In addition to this, we have fostered a strong culture of performance quality, innovation and lateral thinking.

We have not only been eager to embrace technology, but also use it to customize and tweak it to the nuance of our businesses. Strong corporate governance,

APRIL / MAY 2017

Q: The Company undertook a major restructuring exercise recently. Explain to us the merger rationale and what kind of synergies you expect to play out.

Mahendra Singhi, Group CEO-Cement, Dalmia Bharat Group

A prominent figure in the Indian manufacturing industry, Mahendra Singhi is Group CEO-Cement, for Dalmia Cement. Over the last 35 years Mr. Singhi has played a prominent role in the growth and development of the country’s Cement sector In addition to his corporate brief, Mahendra Singhi is actively associated with several initiatives in the area of sustainable development and environment protection. He serves as co-chair of the Cement Sustainability Initiative (CSI) in India. He is also on the Board of Governors of the National Council for Cement & Building Materials.

Cement plant in Ariyalur

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a ‘can do’ attitude, and a zeal to grow are other attributes which have helped us.

India Cement and Construction Materials Journal

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

Is this part of you philosophy This created a renewed and sharper as well? How important are focus to realize our corporate vision environmental considerations (to be a leader in building materials for Dalmia Cement?

A: We reorganized the businesses with a view to simplify the group structure, create one listed entity, consolidate into a single operating cement company and pursue focused growth towards Pan India presence.

that evokes pride in all stakeholders through customer centricity, innovation, sustainability and our values). It further strengthened our position as one of the leading cement players in India, uniquely placed to support the country’s economic growth, and demonstrates our commitment towards achieving simplification and consolidation.

A: Green is at the heart of everything we do. The simplest and most powerful expression of this is the fact that our group’s carbon footprint level is one of the lowest in the world. A strong and incremental green quotient lies at the heart of our organization. At 330 kg/ton, we have one of the lowest specific net CO2 emissions (kg per ton of cementitious material) in the world. We have invested

Our group’s carbon footprint level is one of the lowest in the world

in cutting-edge technologies, forged global environment management alliances and we benchmark to environment standards beyond statutory needs. We recycle extensively, consume waste to reduce costs and enhance green, continuously train our people around the green initiative and raise the threshold of efficiencies Industrial robotic arm

We have fostered a strong culture of performance quality, innovation and lateral thinking Q: How does the PM Modi’s Make in India program will impact the Indian cement industry?

A: Make in India is a remarkable initiative by the Government, which will have a clear impact on promoting the country as a manufacturing hub, besides nurturing industry, enterprise and innovation.

Make in India, the overall thrust on infrastructure and Smart Cities are key opportunities for the cement industry with a clear and measurable impact on growth.

We can expect the industry to achieve greater levels of actualization, besides emerging as a major exporter of clinker and grey cement.

India Cement and Construction Materials Journal

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Leaders Q&A: constantly. This holistically green approach is committed to minimizing our carbon footprint, foster renewable energy capacity creation and focus on adding more water than we consume (water positivity).

Q: How do you envisage materializing the company’s commitment to 100% green electricity?

A: Dalmia Cement has been taking proactive measures to rely increasingly on renewable and green energy. We are the first cement company to join RE100– a global collaborative initiative of the world’s most influential companies committed to 100% renewable power, led by The Climate Group in partnership with CDP. At Dalmia Bharat Group level, around 40% of the installed generation capacity is based on renewables.

Our social development initiatives are driven along the lines of the UN Sustainable Development Goals Already known for leadership on energy efficiency, our long-term commitment to transitioning to 100% renewable electricity came on Energy Day at COP22 in Marrakech, where world governments and non-state actors are gathered to increase ambition and action on climate change. It is a week to the day that the landmark Paris Agreement entered into force and more businesses than ever before are taking bold climate actions, to help ensure global warming stays well below two degrees. After adding 8 MW solar PV capacity for captive use, Dalmia Cement has set an ambitious interim target to increase fourfold its percentage of renewable energy consumption by 2030, compared to 2015.

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Cement Plant

At the Climate Week NYC in September 2016, Dalmia Bharat Cement also joined EP100, led by The Climate Group in partnership with the Global Alliance for Energy Productivity.

We have publicly committed to double our energy productivity by 2030 from a baseline year of 2010-11.

Q: What do you think about the environmental performance of the Indian cement industry?

A: We believe the industry is taking steps in that direction. Compared to the global cement industry, above 60% of the installed cement capacity in India is a member of Cement Sustainability Initiative (CSI), a specific project of the World Business Council for Sustainable Development (WBCSD). The Indian cement industry’s carbon footprint is considerably lower, at 579 than the global average of 612, as per the GNR data published by the Cement Sustainability Initiative (2016).

India Cement and Construction Materials Journal

Q: What steps are you, as an organization, taking to maintain consistence in sustainability?

A: We have tied up with several associations that help in peer-to-peer information exchange, benchmarking performance with universally accepted indicators. Some sector-specific studies/ guidance development is also carried out by these groups. They drive businessfriendly policies through sector-specific approach and periodic reporting. Our associations are: Carbon Pricing Leadership Coalition (CPLC): Coalition of 74 countries and more than 1,000 companies to expand the use of effective carbon pricing policies that can maintain competitiveness, create jobs, encourage innovation, and deliver meaningful emissions reductions.

Cement sector has been playing a vital role in Indian economy

Q: Dalmia is the pioneer and leader in innovation for the past seven decades. Mr. Puneet said that no business can survive nowadays if it doesn’t invest enough in technology an innovation. What are the solutions to modernize a company with more than 70 years of history?

Cement Sustainability Initiative (CSI): Global effort by 25 major cement producers (operations in 100+ countries) accounting for around 30% of the world’s cement production pursuing sustainable development.

International Energy Agency. Aims to present a series of concrete action plans for the large-scale development and deployment of low carbon technologies.

A: We are more than 75 years old, but that’s incidental. More importantly, we are an industry leader in sustainability, the most profitable Indian cement company in an era of negative growth for cement, and the most innovative. Our imagination, agility, eagerness to embrace change, innovation and an obsession with quality in everything we do are the answer. From

United Nations Global Compact (UNGC): Principle-based framework (human rights, labor, environment and anti-corruption, etc.) for businesses. Comprises of 8402 progressive companies from 162 countries.

Caring for Climate initiative of UNGC: A group of progressive companies working closely with the UN Global Compact, positioning themselves to become leaders in the low-carbon market.

Low Carbon Technology Partnership initiative (LCTPi): Launched by World Business Council for Sustainable Development with Sustainable Development Solutions Network and

Dalmia Bharat Group

India Cement and Construction Materials Journal

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Leaders Q&A:

Cement Plant

producing one of the greenest cement, to investing and harnessing solar power to reduce dependence on fossil fuels, to being water positive in production processes, to encouraging start-ups aligned to developing solutions for Smart-City developments, we are applying ourselves to wide areas while staying anchored in our core. We also believe in sharing our best practices and technological know-how with the community-at-large. All of the above converges to making us what we are.

As per the Union Budget 2017, there is definitely going to be an increase in cement demand

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Q: The company is the first in India to have a concrete research lab – Dalmia Research Centre. Can you explain how this center works and what kind of research is performed there?

A: Research & Development played a key role in bringing down the cost of production, aiding marketing operations and attracting new customers to improve the Group’s market share. The company has established a R&D center at Chennai known as Dalmia Cement Research Centre, which is supporting manufacturing, marketing and new initiatives of the business. This is equipped with a strong research team, ultramodern research facilities and a construction application laboratory to support customers.

The company is investing aggressively in Technology and Innovation to deliver outstanding products and services at low costs. The R&D team strives to meet the demand for special application products by moderating the clinker composition and enhancing functional features

India Cement and Construction Materials Journal

of the product. These value-added products cater to specific needs within the construction industry. Along with product improvement, the focus was on making manufacturing operations more sustainable and eco-friendly. Alternate raw materials were used to improve clinker quality. The Group also developed products for mass concreting uses, such as in bridge and dam construction.

International exposure and collaboration with experts in cement R&D helped improve product design, development and application. The state-of-the-art R&D facility of the Group was instrumental in supporting product growth.

Q: Social Responsibility is another of the high priorities for Dalmia. In your programs you are focused in achieving some desirable scales and aiming to reach certain areas.

One of these areas is Social Development. How does this social program work?

A: Our social development initiatives are driven along the lines of UN Sustainable Development Goals (SDGs) for a better tomorrow. Our collaboration with local health departments and hospitals has proved valuable in improving maternal and child health, achieving 100% immunization and reducing mortality rates through focused health services.

Improvement in the quality of social infrastructure, which leads to improved quality of life, is also high on our agenda.

Q: Now, about the global market. The global cement construction market is expected to grow in the next 15 years. Do you feel that the effects of the growth is starting to show in the Indian market?

A: In India, the cement sector has been playing a vital role in the economy. It

has attracted huge investors across the globe. The country has a lot of potential for development in the infrastructure and construction sector. As per the Union

The Group also developed products for mass concreting uses, such as in bridge and dam construction

Budget 2017, there is definitely going to be an increase in demand of cement due to the government’s push for large infrastructure projects and in order to fulfil housing needs.

Q: What are the main expectations you have for Dalmia in 2017?

A: Going ahead, we are optimistic of our prospects in light of the expectation of India growing faster than other countries.

We are completely invested in addressing growth in domestic cement consumption.

The country’s infrastructure sector appears to be turning around, with robust growth already beginning to emerge from the roads segment. The Group possesses attractive operating leverage (its effective capacity utilization was close to 60 per cent at the close of FY16), which means that we would be able to scale with speed to address every demand upturn.

Stationary concrete batching plant

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REPORT

cw research:

Petcoke supply and demand trends through Part II

2021

This is a two-part webinar conducted by CW Group, in which the second one focuses on petcoke consumption, posed to grow due to rising demand in Asia-Pacific. In India, gasification may take a large amount of petcoke use, but doubts remain over a possible environmental tax.

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India Cement and Construction Materials Journal

India Cement and Construction Materials Journal

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REPORT n the first part of this article, we made an in-depth analysis of petcoke production, export, and consumption shares across regional and national markets, as well as by end-users. In this second part, we will take a closer look into end-user trends and discuss the forecast prepared by CW Research for the factors described in the first part through 2021.

End-User trends

As we have seen, clinker calcification is one of the main uses of petcoke. The cement sector will continue to sustain petcoke consumption across several regional markets. However, its share on petcoke consumption will remain almost unchanged by 2021.

Between 2016 and 2021, a new segment will claim almost six percent of the global consumption of petcoke In Asia-Pacific, cement production will rise by a CAGR of seven and five percent in India and Vietnam, respectively. In North Africa and the Middle East, production will increase at a CAGR of 2.5 to 3.5 percent, while in the United States it will grow by three percent.

Between 2016 and 2021, a new segment will claim almost six percent of the global consumption of petcoke. We are talking about gasification, and more specifically of Reliance’s gasification project in Jamnagar, India.

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Petcoke field

Reliance's USD 4 billion coke gasification project was announced for the first time in 2012 and, after many delays, is expected to start operating in June 2017.

At full capacity, 10 gasifiers will use between seven million and 11 million

tons of petcoke per year. Reliance has announced two different models of production: in the first model, the cokers are fed exclusively petcoke; in the second model, they will work with a mixture of 65 percent petcoke and 35 percent coal.

Global Green Petcoke productions and exports ( Mt 2016-2016) Domestic

100

39.3%

39.9%

38.6%

Exports

33.9%

43.1%

46.5%

44.5%

50

2010

2011

Source: CW Research

India Cement and Construction Materials Journal

2012

2013

2014

2015

2016E

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

Venezuela Germany

Spain Indonesia

China Netherlands

Canada Other

India

50

30

10

2010

2011

2012

2013

2014

2015

2016E

Source: CW Research

Regional trends

According to CW Research’s forecast, the Asia-Pacific (excluding China) region is and will continue to be the largest consumer of petcoke. There, demand for petcoke is expected to reach 41.6 million tons in 2021, up from 29 million tons in 2016, an increase of 43.45 percent.

China will also remain the secondlargest petcoke consumer, with demand growing from 22 million to 32.6 million tons between 2010 and 2021, a jump of 48.18 percent. By 2021, South America will be the third-largest consumer with 23.4 million tons; followed by North and Central America with 21.3 million tons.

In the model developed by CW Research, the forecast in which gasification uses six percent of the world’s petcoke supply is based on an average between the two models of production.

The Asia-Pacific (excluding China) region is and will continue to be the largest consumer of petcoke Aerial view of petcoke piles at KCBX’s

India Cement and Construction Materials Journal

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REPORT

Coal piles in Green Bay, Wisconsin

In Europe (excluding CIS), petcoke consumption will continue declining, from 14 million tons in 2010 to 11 million tons in 2021. Also in that year, global consumption of petcoke will reach 155.4 million tons, up from 139 million tons in 2016 and 120.5 million tons in 2010.

India will be an important market in determining the evolution of petcoke consumption worldwide

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Factors pressuring demand for petcoke

India will be an important market in determining the evolution of petcoke consumption worldwide. The Indian government believes that petcoke is an unfair competitor to coal and has already hinted at an environmental tax on the fuel.

Such tax would have a significant impact on cement producers, who are already considering returning to coal, given the competitive advantage of some coal blocks, but also on Reliance’s gasification project.

Coal prices are another important factor to determine petcoke demand trends. Since there is no futures market for petcoke, and prices in the spot market are usually very volatile, using petcoke instead of coal is an unstable choice. In India, coal auction prices have come down by more than 39 percent between June 2015 and September 2016. They recovered by 17 percent by December 2016, but even some users may consider abandoning petcoke and returning to coal, if the latter remains cheaper.

India Cement and Construction Materials Journal

In the cement sector, petcoke faces another competitor: alternative fuels. The use of alternative fuels in cement kilns has become a reality for many companies.

The case of Cemex’s North Lincolnshire cement plant, in the United Kingdom, proves that an old plant can be retrofitted to work exclusively on alternative fuel, in its case, paint, thinners, and inks.

Reasons that push cement companies to consider alternative fuels include lower fuel costs, increasing their position in sustainability rankings, receiving stateprovided rewards, and increasing their shareholder attractiveness.

Also in the cement sector, companies are continuously working towards reducing the amount of clinker they use in cement, in trying to keep up with international standards. They add other materials in order to make the process of cement manufacturing cleaner and cheaper. Less clinker production means less need for calcification, and, consequently, a lower requirement of petcoke.

The more unpredictable factors exploring those reserves may become a Some factors influencing petcoke demand and supply are more unpredictable than others.

China has recently introduced a ban on “unqualified petcoke”. Although some sources say that this restriction contends with the SO2 content of petcoke, it is still unknown what exactly the Chinese government intends with these new legislation. So far, Beijing is pursuing a strict environmental stance, promoting retirement of capacity in power-intensive sectors, like cement and steel. Both policies could have a clear negative effect on petcoke consumption.

On the other hand, large oil sands, or heavy tar, remain unexplored in Canada, with reserves in the north of the country estimated at 70 million tons. Heavy tar is difficult to transport, although some discussions have been made concerning a pipeline, and it would have to be liquefied before being turned into petcoke. However, if demand increases in the global market,

considerable option.

It is also important to take a close look at Venezuela. The country holds a large inventory of petcoke and the government is promoting the construction of new cokers. Companies operating those are willing to ship petcoke directly from the refinery to the international market.

Finally, a long-term factor that has to be considered at a global level is possible legislation on high sulfur fuel oil in the shipping industry. If the use of such fuel is forbidden in the industry, some eight million tons in coking capacity could suddenly enter the petcoke market.

However, it is equally likely that ships would just install cleaners, allowing them to continue using high-sulfur fuel oil.

Consumption of petcoke is expected to increase over the next five years, especially in the Asia-Pacific (excluding China) region, although it will continue to face competition from other energy sources, like coal or waste-based alternative fuels.

In the cement sector, petcoke faces another competitor: alternative fuels

In India, the market that has been the great motor for petcoke consumption, uncertainty remains over Reliance’s coke gasification project and government measures, like an environmental tax on petcoke. Moreover, several factors that are somewhat unpredictable, including Chinese legislation, Venezuela’s new cokers, and the willingness to explore Canada’s heavy tar, may have a significant influence on global petcoke demand and supply trends.

Petcoke storage site on Chicago’s Southeast Side

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feature

Petcoke and furnace oil face possible ban in Indian industry The future is unclear about the usage of petcoke and furnace oil in the National Capital Region (NCR). Some branches of the Indian government have taken to the Supreme Court a possible blanket ban for these materials, due to alarming environmental damage and popular complaint.

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India Cement and Construction Materials Journal

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feature n this article, we analyze both sides of the discussion regarding whether or not petcoke and furnace oil should be banned in Delhi-NCR. We explain how handling these two materials impacts the environment and the toll it takes in Delhi’s population, while also trying to understand how beneficial it is for the Indian economy and industry not to ban these materials.

Environmental studies and the Supreme Court

The Indian Supreme Court has appointed an Environment Pollution Prevention and Control Authority (EPCA), which was briefed that gas supply across the National Capital Region was sufficient, and the time was right to ban the use of polluting industrial fuels - mainly petcoke and furnace (also named fuel) oil.

The Delhi Pollution Control Committee declared petcoke and coking coal as “unacceptable fuels” in 1996 EPCA chairman Bhure Lal and member Sunita Narain advised the Environment Ministry to ban the fuels without further delay, for “India has become the dumping ground of pet coke from countries like USA and China”.

Since the fuel is widely used in captive power plants and the cement manufacturing industry, the ban is currently being worked on in the Delhi-NCR only. However, due to further pressuring from the EPCA, a panIndia ban is under consideration, although a decision has yet to be made. According

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Calcined Petroleum Coke

to the Director-General of the Centre for Science and Environment, and member of the EPCA, “We have recommended a ban on petcoke in Delhi-NCR, but one needs to look at banning it across India as it is a very highly polluting fuel.”

Contrary to statements from the EPCA, the Indian Ministry of Environment, Forests and Climate Change (MoEFCC) has claimed that the formation of secondary pollution particles due to the burning of furnace oil and petcoke in

Indian ports by received petcoke volume on March '17 Kandla Sea Karaikal Sea

Krishnapatnam Sea Kakinada Sea

Vizac Sea Others*

16.2% 5.4%

34.3%

11.4%

18.0%

Source: CW Research

september APRIL / MAY -2017 october India 2015 Cement INDIA and CEMENT Construction & CONSTRUCTION Materials MATERIALS JournalMAGAZINE

20.1%

India petcoke import countries on March '17 United States Canada

Saudi Arabia Others

12.9% 11.1%

50.5% 25.5%

Source: CW Research

study detailed total petcoke and furnace oil consumption in the NCR, which amounted to about 4,516 tons per day for petcoke and 729 tons per day for furnace oil, which may emit 633 tons per day of SO2 from petcoke, and 57 tons per day of SO2 from furnace oil.

The estimated emissions of SO2 in the NCR from petcoke, furnace oil and coal power plants are respectively 41 percent, 4 percent and 53 percent, according to the same study. In its conclusion, the paper mentions emissions inventory and modelling studies for each NCR district are

the NCR is not evident. Therefore, the government is calling for further studies to assess the residual fuels on air quality before their phasing out.

Pollution in Delhi has reached alarming levels

A proclamation was submitted to the Supreme Court, in which the MoEFCC quoted a National Environment Engineering Research Institute (NEERI) study commissioned by the Central Pollution Control Board (CPCB). The

INDIA CEMENT India&Cement CONSTRUCTION and Construction MATERIALS MAGAZINE Materials Journal septemberAPRIL - october / MAY 2015 2017

21

feature

Coal power plant

needed to arrive at a conclusion, including a specific study on industries using high sulfur fuels to ensure that they meet stack emission norms.

A restriction is also needed on the import of petcoke, which is a refinery by-product, as countries such as the US and China were using India as a “dumping ground”

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The study, however, saw a red flag from the researches in the Center for Science and Environment (CSE), followed by claims that the report only considered major industrial units, and disregarded large-scale consumption across small and big units, including generator sets in the region.

The CSE researches followed up with “According to them, only four coal power plants using 6,000 metric tons per day of low sulfur coal with up to 4,000 ppm sulfur emit 53 percent of SO2 from all industrial fuels. But the combined use of petcoke and furnace oil at about 5,200 metric tons per day is nearly as much as coal. But sulfur level in petcoke is 18 times higher and in furnace oil six times higher.”

Seeing all the technicalities that such a move from the Indian government would need, the EPCA sent a plea for, at least, a restriction on the import of petcoke, since countries such as the US and China were using India as a “dumping ground”.

It also recommended the ban of the fuel for captive power generation, except for cement manufacturers.

India Cement and Construction Materials Journal

According to a statement from the Indian Captive Power Producers Association, “Petcoke is the currently available fuel for captive power producers as larger volumes of coal are diverted for independent power producer and public sector power generation projects. Generally, power producers use a mix of 20 to 30 percent petcoke with coal to keep sulfur emissions under check, and to sustain the life of the plant. The government will have to ensure free availability of cheap coal if they want to go ahead with the ban.”

The ban’s effect on Indian economic and social standards

As expected, the possibility of a ban on petcoke and furnace oil is scary for cement producers and other members of the industry, mainly since alternatives for the materials are still expensive for market values. Others are also concerned that the price of natural gas may actually go up after the implementation of the Goods and Services Tax, but the EPCA is pitching for the removal of the VAT on the cost of gas,

which could further help it emerge as a viable alternative.

An independent cement manufacturing consultant said: “The ban will offset the energy savings and lowering of ash-content that come by using petcoke. Due to its higher calorific value, petcoke generates higher energy than other available resources such as mineral coal. The sulfur content too, is removed before it goes to air in cement manufacturing.”

In retrospective, average petcoke prices have declined from a peak of USD 96 per ton seen last year, although this isn’t something that cement makers are cheering about. The price of petcoke delivered to India is currently at around USD 80 per ton.

On a year-on-year (YoY) basis, petcoke and coal prices are still double of what they were, and most cement makers are likely to have exhausted low-cost petcoke inventory by now. Thus, as some analysts have started to point out, the full impact of the upward trend in petcoke and coal prices is expected to be felt in the current quarter, hurting profitability.

Power and fuel costs account for 27-29 percent of the total operating costs for cement companies, and with petcoke and coal prices still high, the impact on margins could be in the range of 250-350 basis points in the fiscal year 2018, if they fail to pass it on.

In the past few quarters, cement makers have increasingly relied on petcoke since it’s a cheaper alternative to coal. What makes the latter dearer is a clean environment cess of INR 400 per ton currently levied on it. Petcoke is currently not being taxed, and its higher calorific content makes it a more attractive alternative to other traditional fuels; however, that could change soon, as the Supreme Court ponders to impose on it the same clean environment cess that coal is already a target of - which could greatly lower petcoke demand from India.

In conclusion, outside of the country, India is seen as the great motor for petcoke consumption. However, the outlook may be changing in the four coming weeks, when the Supreme Court advances with the investigation and the assessment of the information regarding the possibility of a ban on petcoke and furnace fuel.

Environment Ministry should ban the fuels without any further delay

Some would prefer a complete eradication of these materials, due to severe environmental complications such as SO2 emissions and even discontented population, ill from the side effects of said emissions. Others, mainly the industry itself, would rather maintain the use of these materials, for it aids the Indian economy, due to their low cost and ease of obtainability. In the end, the vocal minority stands in court, trying to find the middle ground between both parties, by appeasing them with hurried resolutions, such as taxing existing methods, or swapping them with newer and less profitable ones.

Petcoke container

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23

feature

India’s market strength to continue in the 1H2017

lobal cement demand is expected to show an increasing trend, with growth in regions such as Asia exChina and North America. In the next five years, the cement market in Asia ex-China will be boosted by the Indian, Vietnamese and Indonesian markets, according to the 1H2017 Update to CW Research's Global Cement Volumes Forecast Report.

Highlights from the 1H2017 Volume Forecast Report

The Cement Volume Forecast Report indicates that developing markets will be more exposed to macroeconomic problems, which will not allow them to reach the growth levels of the past years.

In 2016, the general trend for cement volumes showed recovery in key markets,

Larger markets that showed growth in 2016 were Spain, US, China, India and Turkey. In the first month of 2017, India construction GDP slightly decreased by

Cement Consumption Year-To-Date 10%

Developing markets will be more exposed to macroeconomic problems

but some major ones continued to decline.

In the previous year, the largest cement markets that registered a big decline in cement consumption were Brazil, Russia, Saudi Arabia and Italy.

Data as of Dec ‘16

Data as of Nov ‘16

-10%

-20%

Russia* Brazil

Italy*

Saudi Arabia

Spain

US

Note: * Cement Demand was estimated based on cement production trends Source: CW Research

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India Cement and Construction Materials Journal

China*

India* Turkey

1.0 percent. However, this figure doesn’t seem to show the projections for the coming months.

CHART: INDIA GDP from construction (IND billion) 2250

Construction GDP India

10%

% change

In the US, even though the growth of the residential segment continued in 2016, the performance was not at the previous year’s level.

2200

8%

2150

6%

2100

4%

China bounced back from a troubled full year, when demand fell by 5 percent in 2015.

In 2016, however, the market recovered to about 3 percent year-on-year in terms of cement demand. The Chinese market benefited from government tax incentives as well as from the implementation of multiple infrastructure projects.

2050

2%

2000

0%

1950

-2%

2017 outlook points to recovery across the globe

Moreover, the property markets also helped boost the cement sector in China. The Chinese growth in 2016 was driven by two important factors, namely the increase in construction activity, but mainly by the cooperation that was created between the government and the country’s main companies. Looking at the global ex-China figures, the research done by the CW Group estimated that in 2016 total demand reached 1.3 billion tons. CW Group forecasts that until 2021 the figure will reach 2.1 billion tons, increasing by more than 2 percent CAGR in the five-year period.

Outlook 2017

2017 outlook points to recovery across the globe, while markets such as Brazil and Russia will still be affected by wideranging challenges.

1900

Jul '14

Jan '15

Jul '15

Jan '16

Jul '16

Jan '17

-4%

Source: CW Research

USD 33.1 billion worth of infrastructure investment for the 2017-18 Indian financial year. Therefore, CW Group forecasts more than 7 percent year-on-year growth for 2017.

In China, demand is expected to slow to 1 percent growth year-on-year in 2017 as a result of tapering off investments in infrastructure.

For the 2017 forecast in the US, there are diverse variables that are important for the growth of the cement industry. The main factor that will increase American growth is the revitalization of the infrastructure.

Another region that will see a demand growth in 2017 is Europe, particularly the Eastern European and the Scandinavian markets. In Scandinavia, especially in Sweden, the market will grow due to the growth of housing market, given the influx of refugees in the country. Similar to 2016 performance, Saudi Arabia, Brazil and Russia will continue to see a negative growth. Volumes in Brazil are expected to decrease by almost 6 percent in 2017.

2H2016 VS 1H2017

The research done by CW Group for the first half of 2017 has resulted in a revision in the forecast for key markets, namely, Sweden, Greece and Nigeria.

Moreover, Chinese cement demand growth in 2016 was unexpected. Demand grew on the back of strong government spending and investments in housing. CW Research forecast that stimulus effects and greater boost to construction will fade slightly, slowing the demand.

In the U.S., cement demand showed healthy growth in 2016 and is expected to continue at the same pace, supported by strong investments and housing.

For the next five years, the cement market in Asia ex-China will be boosted by the Indian, Vietnamese and Indonesian markets. Other markets in the region will have a slower but stable growth, as is the case with Malaysia and Thailand, which will grow by a CAGR between 2 and 3 percent until 2021.

In India, the new Union Budget is a source of hope for the cement market, although it showed a healthy performance in recent years. The new Union Budget points to

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25

feature

Ultratech Cement’s swift expansion

ltratech Cement is the largest clinker and cement producer and exporter in India. Over the past decade, the company pursued a rapid-growth strategy that included construction of new units, acquisition of other companies, and penetration in new markets. While its closest competitor, LafargeHolcim, remained concentrated on its restructure project, Ultratech pushed forward with the acquisition of Jayprakesh Associates’ cement operation.

The market leadership of Ultratech Cement has been consolidated over the past three years 26

APRIL / MAY 2017

Overview on Ultratech

Ultratech Cement, part of the Aditya Birla Group, went from being a relatively small player to becoming the leading cement producer in terms of installed capacity in India. Thanks to an aggressive growth strategy, including acquisitions and market expansion, the company managed to increase its production capacity from 15.5 million to 66.2 million tons per year between 200405 and 2015-16, a compounded annual growth rate of 14.1 percent.

Apart from India, Ultratech is also present with two grinding units in the United Arab Emirates, and one in Bahrain and Bangladesh, plus a bulk terminal in Sri Lanka. The company is the largest exporter of cement and clinker in India, shipping to countries across the Middle East and around the Indian Ocean.

The market leadership of Ultratech Cement has been consolidated over the past three years. LafargeHolcim, its closest competitor, in control of ACC and Ambuja Cements, has maintained an annual capacity of 58-60 million tons

India Cement and Construction Materials Journal

since 2011, already excluding the 11 million tons of capacity held by Lafarge India, in the process of being sold to Nirma since 2014.

Position in the 3QFY2016

When the Indian government decided to demonetize all INR 500 and INR 1,000 banknotes, raising obstacles to liquidity in the country, pan-Indian cement producers like Ultratech were expected to be among the most hit.

However, unaudited results for the third quarter of 2016-17 show that Ultratech was able to displace most of the negative impact of the demonetarization. In fact, the company has expressed its support for a cashless economy and asserts that most of its transactions are already made without resorting to cash.

The volume of domestic sales declined by two percent to 11.01 million, supported by strong demand in south India. In terms of value, net sales reached INR 5,927 crore against INR 6,013 crore in the same quarter of 2015, a decrease of 1.43 percent.

Profit during the quarter was boosted by cost-control measures, which included an increase in the use of waste heat recovery plants and a fall in lead distance, that is, the distance travelled by cement-freighting vehicles between the production units and the market. Thanks to those measures, Ultratech was able to cut its logistics expenses by three percent and its power and fuel costs by 7.45 percent year-on-year.

the fourth quarter of fiscal year 2019.

According to the company, the new plant will fit in its strategy of reducing lead distance, closely serving the south-west of Madhya Pradesh.

For 2017, Ultratech has also proposed the expansion of the Aditya limestone mining project, located in the Chittorgarh district, Rajasthan. Plans include augmenting

In an effort to reduce its debt, Jaiprakash Associates decided to sell its cement assets to Ultratech

Gross Sales/income from operations in Ultratech / Crones Gross Sales/income from operations

states of Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakh and Andhra Pradesh. The deal also includes an underconstruction grinding unit, in Uttar Pradesh, with a planned annual output of four million tons.

9000 8000 7000 6000 5000 4000 3000 2000 1000 FY16 Q1

FY16 Q2

FY16 Q3

FY16 Q4

FY17 Q1

FY17 Q2

FY17 Q3

FY17 Q4

Source: CW Research

Ultratech’s consolidated EBITDA during the quarter stayed at INR 1,280 crore; compared to INR 1,274 crore a year before.

Its EBITDA margin improved by 100 basis point to 22 percent. Consolidated net profit rose by 4.76 percent, from INR 567 crore to INR 594 crore.

Greenfield expansion

During 2016, Ultratech continued its expansion by commissioning its 15th grinding unit at Patna district, state of Bihar. With this unit, called Pataliputra cement works, Ultratech’s capacity rose by 1.6 million to 69.3 million tons per year.

Ultratech’s board of directors has already approved a new integrated plant with the capacity to produce 3.5 million tons per annum for Dhar, in the state of Madhya Pradesh. The project represents an investment of INR 2,600 crore and is expected to enter production during

limestone output from 10 to 13.17 million tons, therefore providing raw materials needed for the enlargement of the nearby clinker production facility of Sawa Shambupura, from 8.4 million to 8.9 million tons per year.

Brownfield expansion

Last year, Ultratech Cement embarked on the largest consolidation within the Indian cement sector. In an effort to reduce its debt, Jaiprakash Associates decided to sell its cement assets to Ultratech. The deal has already been approved by the Competition Commission of India and by the National Company Law Tribunal. Final approval by the Securities and Exchange Board of India is still pending.

Ultratech will pay INR 16,189 crore for a total of 17.2 million tons of annual capacity, including plants located in the

The deal will significantly reinforce Ultratech’s presence in Central India, adding 11.2 million tons to its annual capacity in the region. Upon completing the transaction, Ultratech Cement will increase its cement capacity to 91.1 million tons per year, or 95 million tons if overseas operations are included.

As LafargeHolcim comes closer to ending the restructure of ACC and Ambuja Cements, it will certainly want to close the gap between itself and Ultratech. In fact, ACC has just finished a clinker facility in Chhattisgarh with a capacity of 2.8 million per year and is already planning two associated grinding plants that will tap into strong demand in east India.

However, Ultratech Cement remains committed to its strategy of growth and determined to stay on top in terms of capacity. The takeover of Jayprakesh Associates’ cement assets, coupled with its plans for new units, will likely give Ultratech a wide advantage during several quarters to come. Moreover, the company showed strong results in the last quarter in spite of adverse market conditions, providing for a robust foundation for its forthcoming expansion.

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27

CEMENT MARKETS

CW Research

CEMENT VOLUMES In February, the macroeconomic environment in South America continued to impact the cement manufacturers in the region. Overall, the cement market in South America has shown year-on-year reductions in both production and demand. Argentina stands out as an outlier, as the Argentinian cement sector appears to have stabilized.

In Colombia, cement demand and production showed monthon-month improvements, and year-on-year falls in February 2017.

Brazilian cement demand showcased the worst performance in our sample for the region.

Cement sales fell 9.5 percent month-onmonth, as well as 16.0 percent year-on-year.

Year-to-date cement demand has registered a 9.7 percent reduction when compared to the same period in 2016.

In Colombia, cement demand and production showed month-on-month improvements, and year-on-year falls in February 2017. Cement sales grew 10.4 percent when compared to the previous month, and fell 3.6 percent when compared to February 2016. Cement supply increased by 15.1 percent on a monthly basis, while it faced a 2.7 reduction on a year-on-year basis.

In Asia, cement producers showed mixed trends in February. Cement manufacturers have been investing in southeast Asia over the previous years, which has conducted to a continuous increase in cement production. However, as a significant share of production in these countries is directed at exporting, cement demand hasn’t shown such a steady growth rate.

February 2017 cement demand – YoY change (%) 10%

In Vietnam, cement production showed a monthon-month increase of 7.5 percent, reaching 5.7 million tons of cement. Year-to-date cement demand has shown a 1.9 percent increase.

In India, cement production decreased as the economy continues to be affected by the 2016 Indian banknote demonetization. Month-on-month, cement production fell by 4.6 percent, while yearon-year, cement production sharply declined by 15.9 percent. Year-to-date cement demand recorded a 14.5 percent decline, reaching 43.9 million tons for the first two months of the year.

In neighboring Pakistan, cement demand has been driven by the construction of the ChinaPakistan economic corridor, leading to an expansion of local cement demand. On a monthly basis, cement sales grew by 16.9 percent, and on a yearly basis, it grew 6.7 percent.

In the Middle East, the declining trend in the Saudi construction sector in 2016 has continued to propagate in the first two months of the year.

Moreover, public investment in the Middle East continued to be hindered by lower oil revenues.

In February, cement production in Saudi Arabia fell 15.4 percent month-on-month, and 26.1 percent year-on year, reaching 4.0 million tons. When it comes to cement demand, it reached 4.0 million tons in February, down 15.9 percent month-onmonth, and 25.2 percent year-on-year. For the year to date, cement consumption fell 20.4 percent when compared to the same period in 2016.

February 2017 cement production – YoY change (%) 25% 15% 5%

-10%

-5%

Source: CW Research

Source: CW Research

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

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India Cement and Construction Materials Journal

Vietnam

Thailand

Argentina

Japan

Italy

Colombia

Peru

India

-25%

Saudi Arabia

Pakistan

Indonesia

Argentina

Japan

Colombia

Thailand

Peru

Brazil

-30%

Saudi Arabia

-15%

CW Research

CEMENT PRODUCTION (million tons) Country

LM

MoM (%)

CEMENT CONSUMPTION (million tons) YoY (%)

YTD

YTD (%)

Country

LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT PRODUCTION MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

LM

YTD (%)

CEMENT CONSUMPTION MOM (%)

CEMENT EXPORTS (million tons) Country

CEMENT MARKETS

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

CEMENT IMPORTS (million tons) MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. WWW.CEMWEEK.COM/SUBSCRIBE CEMENT EXPORTS MOM (%)

YTD (%)

Country

LM

MoM (%)

YoY (%)

YTD

YTD (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. WWW.CEMWEEK.COM/SUBSCRIBE CEMENT IMPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

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

To learn more, please contact the CW Research team at sales@cwgrp.com or +1-702-866-9474 India Cement and Construction Materials Journal

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29

CEMENT ENERGY MARKETS

CW Research

Energy Prices Update COAL: The average coal price for February 2017 closed at $79.80 per ton, increasing 104.2 percent YoY as

compared to February 2016’s price of $39.08 per ton. It increased by 1.8 percent when compared to January 2017’s price of $78.43 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

US petcoke exports rose by 12.6 percent to 2.9 million tons in February 2017 when compared to the previous month, and expanded 24.1 percent when compared to February 2016.

60 50 40

Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb ’13 ’13 ’13 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16 ’16 ’16 ’17

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 totaled 61.97 million tons in February 2017, declining by 15.3 percent in comparison with the 91.36 million tons recorded in January.

With the exception of Indonesia, all countries recorded a contraction in output when compared to the previous month.

PETCOKE: US petcoke exports rose by 12.6 percent to 2.9 million tons in February 2017 when compared to the previous month, and expanded 24.1 percent when compared to February 2016. The US export price for petcoke for February 2017 averaged at $73.91 per ton, increasing by 2.8 percent as compared to January’s price of $71.90 per ton and up 84.8 percent when compared to February 2016’s price of $40.00 per ton.

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

Rolling 12-month average

70 60 50 40 30 20

J ‘17

F ‘15

D ‘16

N ‘16

S ‘16

O ‘16

J ‘16

A ‘16

J ‘16

A ‘16

M ‘16

F ‘16

M ‘16

J ‘16

D ‘15

O ‘15

N ‘15

S ‘15

A ‘15

J ‘15

J ‘15

A ‘15

M ‘15

F ‘15

0

M ‘15

10

Source: customs data

NATURAL GAS: The US Henry Hub spot price traded at $2.82 per MMBTU in February 2017, a 14.5 percent decline when compared to January 2017, and

growing 41.7 percent as compared to February 2016’s price of $1.99 per MMBTU. Price in Europe increased 14.8 percent MoM, reaching $6.27 per MMBTU in February 2017.

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

30

APRIL / MAY 2017

India Cement and Construction Materials Journal

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) - Feb 2017 Country

LM

MoM (%)

PETCOKE - EXPORTS (million tons) - Feb 2017 YoY (%)

YTD

YTD %

Country

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

COAL EXPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

PETCOKE - GLOBAL EXPORT PRICES (USD/ton) Country

WWW.CEMWEEK.COM/SUBSCRIBE MoM (%)

YoY (%)

YTD

LM

MoM (%)

Feb 2017

YoY (%)

YTD

YTD %

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

COAL - GLOBAL EXPORT PRICES (USD/ton) - Feb 2017 LM

YTD %

US PETCOKE EXPORTS PRICES MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. Country

LM

CEMENT ENERGY MARKETS

CW Research

YTD %

WWW.CEMWEEK.COM/SUBSCRIBE

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

NATURAL GAS PRICES (US$/mmBtu) - Feb 2017 Country

LM

MoM (%)

YoY (%)

YTD

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

YTD %

NATURAL GAS PRICES MOM (%)

WWW.CEMWEEK.COM/SUBSCRIBE

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

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

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31

cement market and competition

M

arket and competition

Builders' Association of India calls for cement sector regulation authority The Builders’ Association of India (BAI) called for a specialized regulatory authority for the cement sector due to cement prices.

According to Avinash Patel, president of BAI, end-user cement prices at the end of February rounded INR 400 per 50-kilogram bag, while production costs do not surpass INR 150 per bag.

Patel stressed that the Competition Commission of India previously charged a penalty of INR 6,300 crore on 10 major cement companies under the accusation of pricing cartel.

Taking those arguments in consideration, Patel believes that the Union government should create a regulatory agency for the cement sector in line with the Real Estate Regulatory Authority.

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Andhra Pradesh green construction focus to push fly ash use The State Pollution Control Board (PCB) of Andhra Pradesh suggested builders to use bricks made of fly ash in the construction of both residential and commercial buildings, replacing regular bricks.

The PCB conducted a stakeholders’ meet on green technology buildings, urging architects and builders to come up with green concepts and to bring awareness to the people on environmental-friendly constructions.

“The use of fly ash bricks and energy-saving lighting must be encouraged by the State officials, builders and contractors. The green buildings are not those with just plants and trees, the buildings must be enabled with environment-friendly equipment and green infrastructure, which would save 40 percent of energy and they will not emit toxic waste,” said PCB chairman Phani Kumar.

India Cement and Construction Materials Journal

The board also said that the government had made the PCG certificate mandatory for any kind of construction in the state. It has also collaborated with a few departments of the state government to ensure that constructions take place with at least 33 percent of green materials.

The use of fly ash bricks was highly recommended by the architects and PCB officials, as there is a huge supply of fly ash from the thermal power stations of Andhra Pradesh.

The materials for eco-friendly buildings must have properties like reduced, reused and recycled. A growth in housing construction in the state is about to take place, as a part of capital establishment, therefore the PCB wants architects to concentrate on green concepts for their projects. Builders’ attitude should also change, and buildings should be constructed to have good air circulation and a good use of daylight as well, in order to save on input costs.

Mahagams and Zaak Technologies sign MoU for fly ash recycling India-based MahaGenco Ash Management Services (Mahagams) signed a MoU with Zaak Technologies, based in Germany. The German company is a startup focusing on recycling industrial waste into high value products, using patented clean technologies.

Cement producers focused in regions are better positioned Regional cement players in India stand to benefit from the current trends in the market, as demand for cement is expected to improve in specific geographic locations.

In the southern states, construction activity is growing faster, while in the north there will be more room to pricing strategy due to a decrease in capacity expansion when compared to the south.

In the next three years, the northern region

Cement production costs to rise along with demand Credit rating agency ICRA expects profitability in the cement sector to remain under pressure from costlier production for the rest of FY2017.

ICRA believes that cement demand will improve in the country as the effects of the demonetization dissipate. Cement consumption is forecasted by the agency to grow by four to five percent during 2017-18 thanks to more investment in infrastructure, irrigation, and housing.

However, profitability in the sector will remain subdued due to higher

will add 6.1 million tons in capacity, while the south will add 10.1 million tons. In the eastern and western regions, capacity will hike by 24.1 million and 10.4 million tons.

Demand in the south remains strong thanks to the lower impact of demonetization, thanks to a better banking system, and to new irrigation and road projects in the states of Andhra Pradesh and Telangana.

Regional players in the Indian market include Dalmia Bharat, JK Cement, JK Lakshmi Cement, Ramco Cements, and Mangalam Cement. production costs, especially related to energy and freight. Petcoke prices have been increasing for much of 2016-17, stabilizing at INR 6,700 per ton from November 2016 to mid-February. An increase of 12 percent in diesel prices in the first nine months of FY 2017 has also put additional strain in freighting charges. ”While cement plants from the northern region are likely to pass on the rising power, fuel and freight costs on account of a significant increase in the cement prices on a year-on-year basis, the profitability of cement plants from other regions is expected to be under pressure during Q4 FY2017,” says the agency.

The company is focused on the building and construction sector, and patented a technology that uses the coal fired plants’ byproduct into sand for use as a construction material. As sand mining is a costly and sometimes invasive method, this artificial sand is a cost and resource-efficient method.

Mahagams is located in Maharashtra, the only state in the country that has taken the initiative to formulate an Ash Utilization Policy to utilize the produced material fully. The policy intends to tackle fly ash’s impact on the environment, and to develop an industry focused on it, boosting the local economy.

Cement imports from Pakistan increasing According to the All-Pakistan Cement Manufacturers’ Association (APCMA), cement exports from Pakistan to India increased by 79 percent year-on-year during the period between July 2016 and January 2017, reaching 752,000 tons.

The APCMA believes that Pakistani cement is becoming popular in the neighboring country and that it is being used for both infrastructure projects and real estate.

March 2016 was an important turning point, with monthly exports surpassing 100,000 tons. Then, in July 2016, monthly volumes peaked at 138,000 tons before coming down to 89,000 tons in November 2015.

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cement M&A AND FINANCE

M

&A and finance

Cement Corporation of India selling nonoperational assets The Union government, through a statement from the Minister of State for Heavy Industries and Public Enterprises Babul Supriyo, announced the intention of selling the nonoperational assets of state-run CCI (Cement Corporation of India).

Five units have been chosen for the first phase of divestment, including Mandhar, Kurkunta, Bhatinda, Nayagaon, and Charkhi and Dadri.

For now, the Delhi grinding unit will be kept until legal issues connected to the plant are resolved.

JSW Cement acquires stake at Shiva Cement JSW Cement acquired ACC’s stake at Shiva Cement, a total of 23.7 million shares, for a total or INR 38.7 crore. This is the equivalent to 12.1 percent of Shiva Cement.

in three plants in the states of Karnataka, Andhra Pradesh, and Maharashtra. Shiva was looking for a buyer for over a year as a way to solve its lack of working capital.

In January, JSW Cement had already bought a 35.6 percent stake at Shiva Cement and launched an open offer to acquire a further 32 percent.

Until now, JSW Cement had a total capacity for 8.8 million tons distributed

Grasim and Aditya Birla Nuvo merger could be stopped

In the end, the objective is to divest all seven non-operation assets from the company and then move one to sell the ones that remain operating.

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The merger of Grasim and Aditya Birla Nuvo is in risk. Mutual funds that hold an 8.2 percent stake in Grasim and 7.6 percent in Aditya Birla Nuvo are expected to vote against the merger of the two companies.

2016. The promoters hold 31.2 per cent in Grasim and 58.4 per cent in Nuvo.

The transaction requires a minority shareholders’ vote and promoters are not allowed to vote on the proposal.

Birla Corporation announced plans to merge the two companies in August

Voting began in early March and ended in early April.

India Cement and Construction Materials Journal

Cement companies’ profitability declining due to rising petcoke prices In India, cement demand in the December quarter was highly impacted by the demonetization in most parts of the country, except for Southern India.

Ultratech and JP Associates deal closer to conclusion The deal between UltraTech and Jaiprakash Associates was approved by the National Company Law Tribunal on the second week of March.

Last year, JP Associates agreed to sell its cement assets under its subsidiary, Jaypee Cement Corporation, to

UltraTech, for a total of INR 16,000 crore. The assets include the capacity to produce 17.2 million tons of cement per year across states like Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand, and Andhra Pradesh.

Being the largest consolidation within the cement sector, the deal was subject to several regulatory approvals, of which the National Company Law Tribunal’s is the latest.

ACC Cement’s net profit increases in 2016 ACC Cement improved its net profit during 2016, when it recorded a net profit of INR 604.4 crore, compared to INR 587.6 crore in 2015, an increase of 2.9 percent.

Its revenue fell by 5.39 percent, from INR 11,916.9 crore to INR 11,275.8 crore. Also in 2016, ACC’s volume of sales was down

by 2.7 percent, from 23.6 million to 23.0 million tons, suffering the effects of low utilization ratios.

For 2017, the company is preparing a capex of INR 604.4 crore, said its CEO and manager director Neeraj Akhoury, following ACC’s annual general meeting.

Profitability also plunged during this period, as production costs increased, particularly of fuel prices, such as petcoke, which surged INR 400-500 per ton in the past quarter. Quarteron-quarter profitability for cement companies in the region declined 11 percent, to INR 753 per ton, but is up by 10 percent when compared to the same quarter in the previous year.

Cement companies operating around the entire country, such as ACC and Ambuja Cements, saw a 9 percent decline in volumes when compared to the December quarter of the previous year, while UltraTech dropped 2 percent in the same period.

Meanwhile, companies based in the south of the country, such as Dalmia Bharat, Orient Cement and India Cement, saw a volume growth of 36 percent, 19 percent and 22 percent respectively, when compared to the third quarter of FY2016.

This was due to an improved institutional demand in Andhra Pradesh/Telangana, and a low-base effect, as floods affected the market in Chennai in the same period of the previous year.

Overall, volume growth was flat at 37 million tons during the third quarter.

Demand has been picking up in the first two months of the last quarter, but remains below the regular levels, especially in the retail market.

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35

cement projects and expansions

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rojects and expansions

Ambuja Cement supplying tunnel construction Ambuja Cement has supplied 3.2 lakh tons of cement to the recently inaugurated Chennai-Nashri tunnel, located in the state of Jammu & Kashmir.

The new project was inaugurated on April 2 by the Union Prime-Minister Narendra Modi.

Himachal Pradesh proceeding with plans for cement plant

The plant was projected to the Chamba district, near the Baroh Shind limestone deposits.

The project for a new cement plant in Himachal Pradesh continues to linger after a decade.

The memorandum was cancelled in February 2014 because Jai Prakash failed to set the plant until the agreed deadline, January 2012. The government is now looking for another partner in the project.

In February 2007, the state government of Himachal Pradesh signed a memorandum of understanding with Jai Prakash Associates to build a cement plant with the capacity to produce two million tons.

In the meantime, Jai Prakash moved a legal battle against the state for disagreeing with the decision of cancelling the memorandum.

"India's leading cement manufacturer has once again reinforced its strong commitment towards nation building by playing a vital role in the construction of the prestigious Chenani-Nashri road tunnel in Jammu and Kashmir,� said the company via statement.

The CEO and managing director of Ambuja Cement, Ajay Kapur, added: "It is a proud moment for all of us at Ambuja Cement to be a key partner of the world class Chenani-Nashri tunnel in Jammu and Kashmir�.

NTPC considering expanding its business to cement

The tunnel includes a 9.2-kilometer long single bi-directional tube that will cut the distance travelled between Chenani and Nashri from 41 to 10 kilometers.

Noticing good demand for fly ash in the cement sector, NTPC is considering the installation of cement units close to coalfired power stations that would meet growing demand in the country and ensure total utilization of the byproduct of coal burning.

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Indian power producer and utility NTPC is considering installing its own cement plants to ensure a 100 percent utilization of its fly ash.

India Cement and Construction Materials Journal

Cement uses 19.1 percent of the fly ash produced by NTPC, third only to Singareni Collieries and the clay ash brick manufacturers.

Cement producers continue to favor petcoke Cement producers in India are sticking with petcoke in spite of the higher prices. During March, cement manufacturers continued to import petcoke, even with prices reaching USD 92 per ton.

Emami Cement opens new plant in West Bengal

manufacturer at the site is being sourced at Emami’s captive quarry in Chhattisgarh.

Emami Cement commissioned a new cement plant in the state of West Bengal.

The new cement plant is located in the Panagarh Industrial Park, Burdwan district, and is expected to produce two million tons per year.

The plant will employ 500 workers and produce ordinary Portland cement, Portland Pozzolana cement, and Portland slag cement, to be sold under the Emami Double Bull brand.

Construction of the project represented an investment of INR 500 crore and took 13 months. Limestone for cement

Adani building new grinding facilities in Gujarat and Karnataka Adani Cementation wants to set up new cement and clinker grinding facilities in the states of Gujarat and Karnataka. The company, a subsidiary of Adani Enterprises, is prepared to invest INR 3,000 crore in several project across the two states.

Two new cement grinding units will be set up in Mundra, Gujarat and Udupi,

Emami Cement is expanding it cement business and wants to achieve a total production of 15-20 million tons per year within the next three to five years.

Karnataka, each with the capacity to process one million tons per year.

Additionally, a clinker grinding unit with the annual capacity to process five million tons per year is planned for Lakhpat, Gujarat.

Completion of the three projects is expected to happen within 24 months.

Adani has plans to install 35 to 40 million tons of cement production capacity over the next few years.

They prefer more expensive petcoke to coal linkage auctions from Coal India, especially due to the quality factor.

Mahandra Singhi, CEO of Dalmia Bharat, explains that "Petcoke's quality is better as its heat value is 8,000 kilocalories, while that of Indian coal is 3,500 kilocalories on an average". Given the difference, producers have to buy between 2.5 and three times more coal than petcoke in terms of volume to produce one ton of cement.

Auctioned coal is distributed at around INR 1,500-1,700 per ton.

However, given transportation costs and the additional Clean Environment Cess of INR 400 per ton, auctioned coal becomes more expensive than petcoke.

"The cess is one of the key reasons why cement companies have shied away from the recent coal auction for cement companies", a senior Coal India official reasoned.

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37

cement volume & pricing

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olume and pricing

Cement demand slows in the third quarter Cement sales in the OctoberDecember 2016 quarter dropped significantly for several Indian companies, with southern companies escaping the decline in sales.

During that quarter, cement sales by Pan-Indian firms ACC and Ambuja Cements fell by nine percent yearon-year. UltraTech Cement sold less two percent compared to the same time in the year before. Southbased companies escaped the drop in demand. Dalmia Bharat increased its sales by 36 percent year-on-year, India Cements by 22 percent, and Orient Cement by 19 percent.

Demand was sluggish across the country due to the effects of demonetization. The south was an exemption, thanks to strong investment in Andhra Pradesh and Telangana, the low-base effect caused by floods in Chennai during 2015, and a more robust banking system.

Cement demand rises in the first ten months of FY2017 Cement demand in India increased slightly in the first ten months of fiscal year 2017.

Between April 2016 and January 2017, cement sales in the country reached 233 million tons, a slight increase of 1.1 percent compared to the same period in 2016-17.

The growing rate in the initial 10 months of the previous fiscal year was 3.6 percent.

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In the period between November 2016 and January 2017 alone, cement demand slipped eight percent, pushed down by the effects of the demonetization.

In FY2018, demand for cement is expected to increase by 4-5 percent by the ICRA credit rating agency.

The optimist prediction is made based on increased budgetary allocation for infrastructure sector, which includes roads, railways, metro, irrigation and housing.

Demand to drive cement prices rise Cement prices are expected to rise in India on the back of higher demand, according to several players in the sector.

Cement prices increase in March Cement prices increased two times in March on the northern regions of India.

In the beginning of the month, cement companies increased the price of cement by INR 10-15 per bag, followed by another increase in the end of the month of INR 10 per bag.

A 50-kilogram bag at the end of March cost around INR 300 and INR 330 per unit in the north.

Meanwhile, in the south, cement prices came down by INR 5-10 per bag, displacing the positive effects of the increase in the north. Large brands like UltraTech, Ambuja Cement, and ACC were sold at INR 320-330 per bag while Birla, Shree Cement and JK sold for INR 300-310 per ton.

All-India cement prices have remained largely unchanged after a significant drop in cement sales following demonetization, and in the evening of elections in five states, including Uttar Pradesh.

Cement prices in Northern India increase Cement prices rose in northern India, at the same time that they declined in the southern regions of the country.

In the northern market, cement prices have risen by INR 10-15 per 50-kilogram bag, while in South India, prices declined by the same values.

In the south, prices were pressured down by lower demand in the states of Kerala and Tamil Nadu. In the meantime, in the north, all major companies, including Jaiprakash Associates, Shree Cement, and Birla Corporation, opted for a hike in cement prices. A cement bag in the city of Delhi is currently sold between INR 290 and INR 320 per ton.

H. M. Bangur, managing director at Shree Cement, believes that construction activity in the country will receive a boost from infrastructure development and state investment.

For Shailendra Chouksey, director of JK Lakshmi Cement, there are already signs of recovery on cement demand, following a short-lived declined caused by the effects of demonetization and lower liquidity in the country. “After considerable slippage of prices post demonetization, right up to the first week of February, when the demand of cement had also gone down considerably, we had gone for a partial price increase in the first week of February and again to some extent in the first week of March,� said Chouksey.

Chouksey believes that further correction in prices is still needed, because they continue to be far from the figure registered in SeptemberOctober 2016.

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39

cement news

R

egional news

Pakistani producers complain of high energy costs The All-Pakistan Cement Manufacturers’ Association (APCMA) is not happy with power costs in the country.

According to APCMA, the cost of natural gas and tariffs imposed for electricity are the most expensive on the region, contributing to a reduce competitiveness for Pakistani cement.

Coal, another imported fuel source for the cement sector, is also subject to import duties that have displaced the decrease in prices seen in the global market.

A strong decrease in cement exports was registered during February. In January, exports in the country reached 254,000 tons; 45.69 percent less compared to the same month in 2016.

Pakistan cement market sees rapid expansion The Pakistani cement sector is expected to benefit from the strong infrastructure and economic development to come.

In the next decade, Pakistan will witness large increases in urbanization and housing demand, coupled with large investments made in the context of the China-Pakistan Economic Corridor.

Major companies are pursuing rapid expansion of their production capacity by several means. Bestway recently acquired Dewan Cement, reinforcing its position as the largest

Furthermore, APCMA asks for a 35-percent import duty on cement and clinker to slow down Iranian cement penetration in the Pakistani market. Currently, those materials are subject to a duty of 10 and 20 percent, respectively.

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cement producer in the country.

Smaller companies are making similar investments: Flying Cement recently doubled its production capacity from 2,000 to 4,000 tons per year.

Overall, capacity in the Pakistani cement sector is expected to increase by 29 million tons in the next five years.

However, the cement sector of the country will also have to face challenges.

Neighboring Iran is mounting its output even in a state of overcapacity, and a recently-inaugurated cement plant is located strategically close to the border with both Pakistan and Afghanistan, an important export market for the former.

Dalmia Cement Bharat backs new cement brand in Sri Lanka India’s Dalmia Cement Bharat has partnered with local import firm Oliver Impex to launch the Vijaya Cement brand.

Pakistan cement demand growth slows down in February Cement sales in the country grew by six percent in the eight months leading to February, compared to eight percent in the seven months leading to January.

Also between the two months, exports fell by 32.5 percent from 376,000 to 254,000 tons. Shipments to Afghanistan fell by 47.9 percent, from 166,000 to 86,000 tons while exports to India came down by 20.8 percent, from 124,000 to 98,000 tons. Seabased exports also came down by 32.5 percent, from 376,000 to 254,000 tons.

In February alone, domestic shipments reached 3.18 million tons, up from 2.72 million tons in January, an increase of 16.9 percent month-on-month, explained by better weather conditions in the northern region.

For Pakistan, the Afghanistan market is becoming more difficult to penetrate due to competition from Iran and Tajikistan.

Domestic production in the country has also increased by 100 tons per day, following the reactivation of an old plant.

India uses Pakistan cement in Infrastructure Pakistan is supplying cement to both infrastructure and real estate in India.

According to All-Pakistan Cement Manufacturers’ Association (APCMA), cement exports from Pakistan to India increased by 79 percent year-on-year during the period between July 2016 and January 2017, reaching 752,000 tons.

APCMA believes that Pakistani cement is becoming popular in the neighboring country and that is being used for both infrastructure projects and real estate.

March 2016 was an important turning point, with monthly exports surpassing 100,000 tons. Then, in July 2016, monthly volumes peaked at 138,000 tons before coming down to 89,000 tons, in November 2015.

Mohamed Saly Mohamed Faris, Director of Oliver Impex, stated, “Our main aim is not to compete, but to fill the vacuum which currently exists in the market”.

In order to facilitate the new venture, Oliver Impex will have its own warehousing, transportation and distribution network to make this product competitive in the market.

The company would also make available warehousing solutions in the distributor’s premises as well.

Cement sales went up with strong demand from Sri Lanka's private and household sector. Owing to the needs of the construction industry, the Government of Sri Lanka has also put together special policies that are geared towards the development of the nation.

The Construction Industry is a major contributor to the National Economy and a major driver of employment creation. The development of the construction industry will create a multiplier effect in the national development process.

The latest brand of cement entering the industry will be marketed under the name “Vijaya Cement”, a high quality product that is SLS 107 certified and with strength class of 42.5 N.

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41

cement PEOPLE

P

eople

CEO OF LAFARGEHOLCIM RESIGNS LafargeHolcim’s CEO Eric Olsen resigned from its post. Olsen’s resignation will become effective in July 15. Beat Hess, chairperson of the company, will then be appointed interim CEO. The CEO of LafargeHolcim will leave the position following a statement that qualified as probable the accusation that Lafarge had paid armed groups in Syria to keep its plants in the country operating, revealed by the company itself.

Eric Olsen explains that he was not responsible for any wrongdoing, but understandsCement that muchappoints attention Burnpur has been given to its possible Saurabh Ganguly as involvement in the case.

brand ambassador

Burnpur Cement Ltd announced that they signed an agreement with Saurabh Ganguly, Former Captain of Indian Cricket Team, to act as the Brand Ambassador for a period of three (3) years, effective from March 11, 2016.

Under the agreement, Mr. Ganguly as the Brand Ambassador of the Company will endorse the product and brand of Burnpur Cement which may help in increase of sales of the Company.

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LafargeHolcim to change board of directors The Board of Directors of LafargeHolcim will nominate Patrick Kron for election as a new Board member at the Group’s upcoming Annual General Meeting on May 3, 2017. At the same time, Philippe Dauman and Alexander Gut have taken the decision not to stand for re-election.

As communicated earlier, Bruno Lafont, currently Co-Chairman of the Board of Directors, has also decided that he will not stand for re-election.

“We are pleased to nominate Patrick Kron. He is an experienced leader with an extensive track record in transforming industrial companies. His skills will be highly complementary to the existing

India Cement and Construction Materials Journal

knowledge pool in our Board”, says Beat Hess, Chairman of the Board of Directors of LafargeHolcim. “On behalf of the Board, I would like to thank Bruno Lafont, Philippe Dauman and Alexander Gut for their many years of service and significant contributions to the success of LafargeHolcim.”

All other current members of the Board of Directors will be proposed for reelection at the Annual General Meeting: Beat Hess, Chairman; Bertrand Collomb; Paul Desmarais, Jr.; Oscar Fanjul; Gérard Lamarche; Adrian Loader; Jürg Oleas; Nassef Sawiris; Thomas Schmidheiny; Hanne B. Sørensen; Dieter Spälti.

With the election of the nominees, the Board of Directors would consist of 12 members, as compared to 14 today.

orders & equipment highlights

O

rders & equipment

Gebr. Pfeiffer supplies new mill to Sagar cement Gebr. Pfeiffer will provide Sagar Cement with a new plant for the production of blast furnace slag grains. The plant has a capacity of producing 160 tons per hour in the Bayyavaram Village unit.

For that purpose, Gebr. Pfeiffer will shop a type MVR 5000 C-4 mill, equipped with a 4,300-kilowatt drive and four grinding rollers with active redundancy. During maintenance works, two of those rollers can be taken out of the mill while the other pair continues to grind.

Core components of the mills, including the roller, tension system, grinding bowl and planetary gearbox, will be supplied from Europe. The mill foundation parts, the housing and the integrated high-efficiency classifier of the type SLS 4750 BC will be provided

by Gebr. Pfeiffer India. The local subsidiary will also supply most of the equipment required to complete the grinding plant, including the plant fan and hot gas generator.

Delivery is scheduled to take place before the end of 2017.

Adani cementation to build new grinding facilities Adani Cementation wants to set new cement and clinker grinding facilities in the states of Gujarat and Karnataka.

The company, a subsidiary of Adani Enterprises, is prepared to invest INR 3,000 crore in several projects across the two states to meet the growing demand of cement in south and west India, people close to the development told FE.

machinery order. Adani Cementation was set up in December last year as part of a long-term strategy to set up integrated cement-manufacturing plants, grinding units and limestone mines.

Adani plans to set up close to 35-40 million tons per year of all-inclusive capacity of grinding, clinker and manufacturing facilities in the coming years.

The company has invited engineering consultancy bids to set up 2-millionton-per-year cement-grinding plants at Mundra, in Gujarat, and Udupi, in Karnataka. Besides these, there will be a 5-million-tons-per-year clinker-grinding facility at Lakhpat, in Gujarat.

The project is likely to be completed in 24 months, including 18 months for project execution after placement of the main

Gebr. Pfeiffer reveals mill orders in India

Gebr. Pfeiffer has released information about orders for its mills for projects in India, Pakistan and South Africa.

In India, Wonder Cement has ordered a MVR 6000 C-6 vertical roller mill from the company for its Nimbahera cement plant in Chittorgarh, Rajasthan. The mill will have a 5820kW drive and it will

grind cement to a fineness of 4500 cm²/g according to Blaine. The mill can also be used to grind blended cement, using slag, fly ash and gypsum.

Core components of the mill, including the rollers, will be supplied from Europe. The mill foundation parts, the housing and the integrated SLS 5600 BC classifier will be provided by Gebr. Pfeiffer India. Delivery of the mill is scheduled by the end of 2017.

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43

CONSTRUCTION BUILDING MATERIALS BY BMWEEK.COM

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onstruction & building materials by bmweek.com

CRH acquiring new assets in North America International building materials group CRH announced the acquisition of Mulzer Crushed Stone, along with seven other businesses located in North America.

Mulzer Crushed Stone has several locations in Indiana, Kentucky and West Virginia. It was established in 1935.

Frac Sand demand rising in the United States Around the United States, the number of oil rigs is rising, and with them the concerns about the supply of frac sand.

A few weeks ago, the rig count in the country reached 591, the highest since October 2015.

The sand is pumped into wells, along with other materials, to break up shale rock and produce oil. As wells get longer and wider, larger amounts of sand are required.

Frac sand companies were hit hard in the oil rout of the previous two years, but global oil production cuts should provide stable higher prices, so producers could be looking at long term supply contracts again.

Companies estimate frac sand demand will hit record levels in 2017, at around 55 million tons, and could exceed 80 million tons by 2018, 60 percent above 2014 levels, due to producers requiring more sand per well. This could mean a price rise of 60 percent in the next 18 months.

CRH acquired these assets since the start of 2017, and is divesting six other businesses, which should result in total proceeds of EUR 400 million.

The acquisitions amounted to around EUR 500 million.

“CRH’s development activity in the first two months of 2017 demonstrates both our strong pipeline and our commitment to value-accretive portfolio management. With the disposal transactions announced today, proceeds from divestments since 2014 will have reached EUR 2 billion, and the Group continues to reinvest these proceeds to strengthen our core existing businesses and expand our operations,” commented Albert Manifold, CRH Chief Executive.

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Burnco acquires Bestway concrete Burnco Rock Products has acquired Bestway Concrete, a ready-mix concrete and aggregate producer based in Milliken, Colorado. Bestway Concrete supplies Northern Colorado, including the Denver metropolitan area.

Both Bestway’s management team and name will be held, and the company will still operate from its Milliken

India Cement and Construction Materials Journal

headquarters. The company will also be expanded, as the Northern Colorado market has growth potential.

Bestway operates nine ready-mix concrete plants and four aggregate pits. The company provides ready-mix concrete and aggregates for a broad range of applications, including commercial, residential, industrial and infrastructure developments.

US researchers develop new concrete from fly ash Inventor Jinhong Zhang, Associate Professor of Mining and Geological Engineering in the University of Arizona’s College of Engineering, developed a new substitute for concrete.

Boral’s profit grows on booming housing market

In the December quarter, the drier weather allowed for a strong recovery.

Boral’s net profit for the second half of 2016 rose 12.3 percent when compared to the previous year, reaching USD 153.4 million.

In its US business, Boral posted higher earnings, in part due to an ongoing recovery in housing activity and higher prices. Its joint venture, USG Boral, also benefited from strong housing markets.

Revenue fell 4.6 percent to USD 2.09 billion due to the completion of several large projects, and accounting matters related to the Meridian brick joint venture in the US. The company has benefited from the strong housing market and rising demand for construction materials in Australia. However, earnings in its Australian activities fell in the half year, as higher volumes and pricing gains were offset by completion of work at several LNG projects, the Barangaroo project in Sydney, and a decline in Western Australia’s brick market.

Boral has also acquired assets in the US market, namely building products supplier Headwaters, by USD 2.6 billion, announced in November and expected to be completed by mid-2017.

The companymaintained its guidance for full year earnings to be higher than in the previous year, driven by gains in its Australian business. The gains are expected to be partially offset by the loss of USD 6.5 million in EBIDT from its divestment in the 40 percent share in the Boral-CSR bricks joint venture, in November.

Martin Marietta’s net sales grew in fourth quarter S-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.

“Looking ahead, we expect continued and accelerating growth in all three of the Company’s primary construction end-uses, and our leading market positions will allow us to continue benefiting from these opportunities in 2017 and beyond.

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 million, compared to USD 750.7 million in the previous year.

We are highly confident that a durable, multi-year construction recovery is now underway, consistent with third-party forecasts,” said Martin Marietta’s President and CEO, Ward Nye.

The new material has a number of advantages over traditional Portland cement, being lighter, stronger and less expensive to produce than concrete. It uses three times as much fly ash as well.

The substitute is being marketed under a company by the name of Acrete, a mix of “Arizona” and “concrete”.

"Once the technique developed at the University of Arizona is applied in industrial practice, it will substantially substitute concrete in the construction industry," Zhang says. "It will save the impoundment space for fly ash and reduce CO2 emission during the production of cement. It will be a novel construction material for the new era for a sustainable development."

Fly ash is already an additive in the production of Portland cementbased concrete products, but only makes up around 30 percent of the solid material. In Acrete, fly ash provides nearly 100 percent of the solids for the end product, without adding cement.

"Acrete can have as much as three times the compressive strength of cement and twice the flexural strength," says Tech Launch Arizona licensing manager Bob Sleeper, who collaborated with Zhang to protect and commercialize the invention. "It repels water, and we can control the workability by tweaking the recipe”.

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PETCOKE PRODUCTION, SHIPPING AND PRICING BY PETCOKEWEEK.COM

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etcoke production, shipping and pricing by petcokeweek.com

BNSF railways studying petcoke transportation feasibility in the US BNSF Railways is studying the feasibility of covering its petcoke and coal loads in open-top freight cars after a consent decree filed in the US District Court, in Seattle. The company also agreed to clean up cargo that spilled during the open-top transportation process.

According to the environmental groups that filed a complaint against BNSF, dust and other discharges from the open-top train cars as they traversed the Pacific Northwest were dumped into waterways, a violation of the Clean Water Act. The company settled the matters for the sum of USD 1 million to finance environmental projects in Washington state, with BNSF spokeswoman Courtney Wallace claiming that the original allegations were sweeping and unfounded, and the amount is small compared with what was requested in the initial lawsuit.

Petcoke prices rise in Brazil Prices for green petroleum coke rose 66 percent in the last six months in Brazil.

Due to the fuel being a major input for lime production, experts are worried that consumers will see a rise in product prices.

Lime is used in construction, water treatment, agriculture, and even steel production – meaning that prices could rise for basic everyday items, such as forks, to real estate.

"The lime industry is working at its limit, but we still have not passed the price on to our buyers because the economy is down. If this happens, it will be a cascade effect because everything will rise as well”, explained Edvaldo Almada, president of the Cal and Gypsum Industry Union (Sindicalge-MG).

From September 2016 to February 2017, uncalcined petcoke prices expanded from BRL 35,57 per kilogram to BRL 59,08 per kilogram.

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"Green petroleum coke accounts for 40 percent to 50 percent of the cost of producing lime. For every lime produced, we use between 80 kilograms and 110 kilograms of coke supplied by Petrobras - which has a monopoly on the production of this fuel.

In November, we asked for a meeting with the president of Petrobras to explain the impacts of such a high readjustment. But it was delegated to a director, then to a superintendent, and to this day we were not called in for an explanation”, says Almada.

According to Petrobras, which does not comment on its pricing policy, rising demand coupled with a stable production, between 2.2 million cubic meters and 2.8 million cubic meters, led to an increase in prices.

"We are working without any profit margin and without any prospect of investment in technology", Almada affirms. If petcoke prices were to rise further, the lime industry would have to raise prices by 20 percent, from an average of BRL 200 per ton to BRL 240 per ton, which Almada calls “impracticable” in the current economic context.

India’s petcoke demand sluggish in February Petroleum product consumption growth in India is still weak, continuing the declining December trend.

Overall product demand grew 3 percent year-on-year, while demand for petcoke has remained mostly flat when compared to February 2016.

Petcoke handling rises in Russia Petcoke handling and transportation by railway in Russia rose 99.5 percent in the first two months of 2016 when compared to the same period of 2016.

According to the Main Computing Center Railways (MCC), the loading of oil products amounted to 42.11 million tons in January-February, remaining relatively stable when compared to the same period of the previous year, which recorded a handling of 42.48 million tons.

Fuel oil loading in this period reached 9.4 million tons, a contraction of 0.2

percent when compared to 2016. Fuel oil accounts for 22.3 percent of the total loading of oil and oil products.

5.18 million tons of unleaded gasoline were shipped in January-February, a decline of 6.7 percent when compared to the same period in 2016. The fuel is 12.3 percent of the country’s total volume of oil and oil products shipped by rail.

Diesel, which accounts for 12.1 percent of all shipments, rose 2.6 percent yearon-year, to 5.1 million tons, while loadings of crude oil fell 10 percent, from 3.8 million tons to 3.42 million tons, or 8.1 percent of all volume.

Petcoke profits rise in China

up. Petcoke prices in particular rose slightly during the last week of March.

In the Shandong province, in China, companies gathered an estimated profit of CNY 226 per ton, a decrease of CNY 39 per ton.

Integrated sales revenue stood at CNY 5,578 per ton EBIDTA, after which it is possible to estimate a profit of CNY 226 per ton.

International crude oil prices dropped in the end of March, but the popularity of refined products is pushing the industry

Diesel transaction prices dropped CNY 50 per ton to CNY 5,100 per ton, while hydrogenated naphtha increased CNY 180 per ton.

Year-to-date results for the current fiscal display an overall fuel demand growth of 6.5 percent, after growing 11 percent in the same period of the previous fiscal. Petcoke growth, however, modestly rose only 4 percent, after growing 9.5 percent in the same period of FY2016.

In tonnage, however, petcoke consumption in India has surpassed gasoline, remaining the fastestgrowing petroleum product since FY2012, and reporting a growth of 31 percent when compared to the previous year.

Other fuels, such as diesel, saw their demand decline by 2.3 percent over the last three month, after reaching a historic growth of 7-7.5 percent in the previous year. Fuel oil and bitumen have also been declining since December 2016.

However, consumption of gasoline and ATF have remained relatively robust, with LPG consumption rising when compared to kerosene, which has tumbled over 30 percent in the most recent months.

LPG reached a record growth in the current fiscal, at a 12 years high, reflecting a conscious government strategy to shift households away from kerosene and towards LPG.

India Cement and Construction Materials Journal

APRIL / MAY 2017

47

analyst recommendations Ramco Cements The consensus forecast amongst 25 polled investment analysts covering Ramco Cements advises that the company will outperform the market, As of Apr 10.

UltraTech Cement As of Apr 07, the consensus forecast amongst 45 polled investment analysts covering UltraTech Cement advises that Ultratech Cement will

Ambuja Cement Independent analyst, Kunal Bothra, recommends to buy on Ambuja Cements with a target price of Rs 270. The current

outperform the market. This has been the forecast since the improved sentiment of investment analysts on Jul 22, 2014. Previously, the forecast advised investors to hold their position in the company.

This forecast happened since the sentiment of investment analysts improved on Nov 06, 2012, times when the recommendations were for investors to hold their position in Ramco Cements.

market price of Ambuja Cements is 246.2. Time period given by analyst is intra day when Ambuja Cements price can reach defined target. The analyst also recommended to keep stop loss at Rs 232.

JK Lakshmi Cement

India Cements Kunal Bothra has a buy call on India Cements with a target price of Rs 176, with a stop loss at Rs. 166.

The current market price of India Cements is Rs 168.45. The time period given by the analyst is Intra Day when India Cements price can reach defined target.

The forecast amongst 21 polled investment analysts covering JK Lakshmi Cement advises that the company will outperform the market, a sentiment since April 7.

This has been the consensus forecast since the sentiment of investment analysts deteriorated on Aug 17, 2015.

Mangalam Cement As of Apr 7, the forecast amongst 7 polled investment analysts covering Mangalam Cement advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts deteriorated on Aug 12, 2015. In the previous forecast, the analyst advised investors to purchase equity in Mangalam Cement.

48

JANUARY / FEBRUARY 2017

India Cement and Construction Materials Journal

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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: April 20, 2017

Trade Price Report 1Q2017

May 11, 2017

Global refractory market report

July 13, 2017

Trade Price Report 2Q2017

Cw research newest report:

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APRIL / MAY 2017

Global Cement Trade Price Report 1H2017

Bangladesh Country Report 2017 update

Sri Lanka Country Report 2017 update

February 2017

March 2017

March 2017

India Cement and Construction Materials Journal

BUZZ

LafargeHolcim announces 2016 results

4.

CRH to make large investment in new acquisitions

5.

LafargeHolcim reports on alleged financing of insurgent group in Syria

6.

New plants planned for the Philippines

7.

CRH to sell cement plant in Germany

8.

LafargeHolcim to increase output in Algeria

9.

Cementos Argos's subsidiary expands in Puerto Rico

10. Cement plant in Maryland catches fire

recorded

exports consumption crore

products

slag

ministry INDIA

activity

3.

India: new budget brings midly positive outlook for cement

4.

India: ACC has new managing director and chief executive

5.

India: Malabar Cements to expand its production capacity

6.

India: Aditya Birla Nuvo acquires stake in Grasim Industries

7.

India: NTPC to enter cement business

8.

India: Ambuja Cements, ACC may be merged

exports

region economic development

GRANITE

concrete

India: Birla Corporation renames reliance perfect cement brand

materials

2.

using

Petcoke handling rises in Russia

4.

India’s petcoke demand sluggish in February

5.

Petcoke profits rise in China

6.

Not enough proof that petcoke is causing pollution

7.

Petcoke-powered energy project still in hibernation

8.

US petcoke exports drop in January

9.

Brazil: Petcoke production still on decline

output

coke

materials results

industrial

waste

growth

imports russia

results

Shree Cement to setup cement plant in Karnataka

global portland

sold

investment

1.

economic

waste

3.

refinery

recorded

power reach

short thermal volume

IRAN

large

paid

industrial

FACTORY

decline exports

3.

IRAN

BNSF railways studying petcoke transportation feasibility in the US

products

Camargo cornea puts Intercement on sell

Petcoke prices rise in Brazil

2.

petroleum

vietnam

2.

produce

1.

imports

LAFARGE

increased

decline

FLSmidth receives order for new cement plant in Egypt

TOP petcokeweek STORIES

saudi

india

1.

1h2016

product

official

GLOBAL

lafargeholcim short

imports

seeks

imports

region results

india

TOP BMWeek.com STORIES 1.

Burnco acquires Bestway concrete

2.

US researchers develop new concrete from fly ash

3.

Frac Sand demand rising in the United States

4.

Martin marietta’s net sales grew in fourth quarter

5.

Boral’s profit grows on booming housing market

6.

CRH acquiring new assets in North America

7.

Construction materials output drops in France

8.

Frac sand prices rise in the US

9.

Holcim Mexico creates new solution to accelerate construction

produce India Cement and Construction Materials Journal

APRIL / MAY 2017

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