India Cement and Construction Materials journal (ICCM) 36

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issue 35

Cement

JUNE / JULY 2017

& construction Materials

LEADERS Q&A

ANIL KUMAR PILLAI JSW CEMENT CEO & DIRECTOR CW RESEARCH

THE EXPANSION OF THE BANGLADESHI CEMENT MARKET

FEATURE

THE INCREASING INVESTMENT ON INFRASTRUCTURE IN INDIA News

|

Analysis

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CW RESEARCH

SRI LANKA: A REBOUNDING CEMENT MARKET Market Coverage

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Interviews

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People

textile packaging l consumer bags l recycling

l

4

Leaders Q&A: Mr. Anil Kumar Pillai, JSW Cement CEO

In an interview with CNBC-TV18, quoted by Money Control, Anil Kumar Pillai said that the company will use part of Shiva Cement’s clinker for its Salboni unit

6 Feature: The increasing investment on infrastructure in IndiA

Government spending in infrastructure brings positive forecast for cement producers

10

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DEPARTMENTS

FEATURES 2

Editorial Letter

3 numbers in brief

Post demonetization, Indian cement manufacturers return to growth

Luísa Azevedo

Research and Analytics 26 Cement Volumes 28 Cement Energy 46 Analysts Recommendations

Liviu Dinu Ana Margarida Meira

Editorial Coordinator

Advertising

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The Life Cycle Assessment (LCA), carried out by the German PE International AG and commissioned by the Austrian machinery supplier Starlinger, compared sewn sacks made in China and kraft paper sacks made in Saudi Arabia with AD*STAR sacks

16

Diogo Vieira sANTOSH sHETTYE

Feature: ACC and Ambuja Cement join forces to take over Indian cement

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cement

Bangladeshi cement market expanding with public infrastructure investment

Despite a highly fragmented industry and its strong dependency on clinker imports, the outlook through 2021 remains promising

24

Country Snapshot: Sri Lanka a rebounding cement demand supported by infrastructure investment

Following a turbulent period plagued by war, Sri Lankan cement consumption has risen over the past few years

4

Raluca Cercel Ana Catarina Almeida Tea Vukicevic Sara Ruas Paulo Cruz Filipe Gouveia Frederico Ribeiro Margarida Cunha CONTRIBUTING WRITERS & RESEARCHERS

Both companies’ boards have initiated studies to explore the possibility of a merger

22

rOBERT MADEIRA cemweek publisher head of cw group research

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Feature: Packaging cement in a sustainable way

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Boost on India infrastructure spending

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letter from editor

The boost in India’s infrastructure spending

he infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and, through this year’s Union Budget,will benefit from a solid investment. Initiatives in vital areas, such as housing, transportation and energy, are bound to create world-class infrastructure in the country, thus leveraging its competitiveness.

The Indian economy will grow next year by virtue of consumption revival and higher infrastructure spending.

The economy is also expected to benefit from the introduction of a nationwide goods and sales tax (GST), thus eliminating multiple state sales taxes and making it far easier to do business in India.

how investment in infrastructure is boosting cement consumption in both countries. Besides analyzing the configuration and evolution of both domestic markets in 2017, CW Research also charts the outlook through 2021.

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.

Additionally, this issue highlights the merger of the two main companies in India: ACC and Ambuja Cement, both part of the LafargeHolcim conglomerate.

Elsewhere in this issue, CW Research’s Cement Market Reports for Sri Lanka and Bangladeshemphasize

2

June/July 2017

ROBERT MADEIRA

CEMWEEK PUBLISHER HEAD OF CW GROUP RESEARCH

India Cement and Construction Materials Journal

Luísa Azevedo

Editorial Coordinator

numbersin brief Post Indian cement manufacturers demonetization return to growth Following a quarter when both major and smaller Indian cement companies’ revenue and profit levels were affected by demonetization, the quarter ended March 2017 brought about far more encouraging results.

Ultratech, ACC, Shree Cement, India Cements and Prism Cement were all able to sell cement products at a higher price. The price hike helped the companies mitigate a mostly unfavorable expenses scenario. For most of the companies mentioned above, 1Q 2017 came with an increase in input costs and in freight and forwarding expenses, as the shipping market is recovering. For instance, in ACC’s case, freight and forwarding costs jumped by more than 42%, while Ultratech’s profit for the quarter fell as input costs expanded Q1 2017 Revenue and QoQ change (LH axis: Revenue in Rs crore; RH: QoQ % change) QoQ % change

Revenue (Rs crore)

9,000

Source: CW Research

6,000

3,000

-20%

Ultratech

ACC

Shree Cements

India Cements

Prism Cement

Indian cement companies witnessed healthy EBITDA margins in the quarter ended March 2017 as compared to the quarter ended December 2016, yet on a year-on-year basis most cement manufacturers saw EBITDA margins declining. Given the mergers and consolidations announced for the rest of the year, margins are likely to improve. One note-worthy distinction during the quarters ended March 2017 is Prism Cements, which after securing a coal block from Coal India, managed to bring down fuel costs and to put its EBITDA margin back on a growth track.

Q1 2017 Revenue and QoQ change (LH axis: Revenue in Rs crore; RH: QoQ % change) Ultratech India Cements

Shree Cements Ultratech 10%

20%

India Cement and Construction Materials Journal

30%

June/July 2017

Source: CW Research

ACC

3

Leaders Q&A:

Anil Kumar Pillai JSW Cement buys ACC’s stake in Shiva Cement

Anil Kumar Pillai, Director and CEO of JSW Cement, in an interview with CNBC-TV18, quoted by Money Control, said that the company will use part of Shiva Cement’s clinker for its Salboni unit and this acquisition will help leverage grinding operations in the eastern region.

SW Cement Ltd, part of the billionaire Sajjan Jindal-led JSW Group, has bought cement maker ACC Ltd’s entire stake in Shiva Cement. This deal will help JSW Cement increase its capacity, currently set at 8.76 million tons,distributed by three plants in Karnataka, Andhra Pradesh and Maharashtra.

Shiva Cement had been looking for a buyer for almost a year. The companyhad expanded its annual capacity from 1,320 tons to 1,980 tons last fiscal year but couldn’t start commercial production because of a shortage of working capital, according to its annual report.

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June/July 2017

The benefits of buying a stake in Shiva Cement In January, JSW agreed to buy a 35.6 percent stake in Shiva Cement from its promoters for INR 97.24 crore and made an open offer to acquire another 32 percent from public shareholders in the Odishabased company. Currently, Shiva Cement's debt is around INR 65 crore.

Our plans are that by 2018 we should be having a capacity of 18 million tons of cement

India Cement and Construction Materials Journal

As part of the expansion plan JSW Cement has embarked upon, the company has been intending to foray into the eastern market. JSW Cement is coming up with 2.4 million ton of capacity in West Bengal, which would be commissioned in the current financial year by March-April. The company also plans to put up a 1.2 million ton grinding unit at Odisha.

The current capacity of Shiva Cement is 0.2 million tons of cement and 1,200 metric tons of clinker per year. According to Anil Kumar Pillai, Director and CEO of JSW Cement, "Now, going forward, what we intend to do is that we intend to put up a new plant of 1 million ton clinkerising unit and for this clinkerising unit we feel that we need to make an investment of close to INR 450 million ".

According to the CEO of JSW, “Our original proposal was to use imported limestone, imported clinker for this particular grinding unit. Now, by taking over Shiva Cement and implementing an expansion at Shiva Cement, part of the clinker would be utilized from Shiva Cement for meeting the requirements of the grinding units which we have put up at Salboni. We are also going to put up a grinding unit in Odisha which would come up at Jajpur. So, this particular unit would cater to the clinker needs of these three grinding units”. "We are also going to put up a grinding unit in Odisha which would come up at Jajpur. So, this particular unit would cater to the clinker needs of these three grinding units," said the CEO. When questioned about what kind of benefit JSW expects from the acquisition

of Shiva Cement, Anil Kumar Pillai stated that the company aims to grow in the East market, particularly in the West Bengal, Odisha, Jharkhand and Bihar markets, which have the highest growth potential.

Our original proposal was to use mported limestone and imported clinker for this particular grinding unit

Outlook for 2018 Shiva's Cement capacity is relative to clinker. So, for "every 1 ton of clinker, we shall be adding 2.5 tons of cement. So, this fits into our overall scheme of things because we were working on the principle of using imported clinker”.

With the acquisition of Shiva Cement, JSW intends to achievea capacity of 18 million tons of cement in 2018. "Parth Jindal, our Managing Director wants us to reach 30 million tons by 2020, which means we will have to practice double our capacity”, said Anil Kumar Pillai.

We are expanding our capacity from 6.8 million tons to 17 million tons and the exercise is expected to be completed by April 2018.

India Cement and Construction Materials Journal

June/July 2017

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feature

Infrastructure to boost cement demand in India Government spending in infrastructure brings positive forecast for cement producers

W

ith the recently introduced 2017 Union Budget, the Indian government is preparing a large-scale investment in infrastructure. India’s willingness to spend large sums in infrastructure is not new, but this budget takes it further. Cement manufacturers like UltraTech Cement and ACC believe this to be a great opportunity to improve their sales and financial results in the coming quarters.

government investment in infrastructure under the 12th Five-Year Plan for 20122017. During that time, the Center invested in industrial parks and residential buildings, and also in schemes such as the Jawaharlal Nehru national Urban Renewal Mission, the National Rural Health Mission, and Indira Awas Yojana.

and Urban Transformation, to develop 500 cities by 2022 using INR 500 billion.

Then, in 2016, the government initiated the Bharatmala program, with prospects of building 7,000 kilometers of roads connecting East India to West India, adding a further INR 900 billion to their infrastructure expenses.

In 2015, the Indian government launched two new schemes: the Smart City Mission, aiming at the development of infrastructure on 100 selected cities, with a total investment of INR 480 billion, and the Atal Mission for Rejuvenation

The Modi administration enthusiastic to increase activity sector, pouring large amounts of into projects on transportation,

India’s drive for Infrastructure

The infrastructure sector is a major driver of the Indian economy. Between 2012 and 2016, the construction industry in India grew by a CAGR of 3.5 percent, supported by strong

6

June/July 2017

India Cement and Construction Materials Journal

seems in the money energy,

and housing. In the 2017 budget, the government set aside some INR 24.1 trillion for infrastructure, up from INR 22.1 trillion in 2016. Alone, infrastructure spending accounts for nine percent of this year’s Union Budget.

Nitin Gadkari, the Minister of Road Transport and Highways and Shipping, recently announced a capital

expenditure of INR 25 trillion in infrastructure over the next five years, including INR 8 trillion to develop 27 industrial clusters and INR 5 trillion for roads, railways, and ports. Also, 12 new expressways will be built across the country, with three beginning on 2017 already, said Gadkari.

in transmission grids infrastructure until 2022.

and

other

The lower and middle classes are driving demand for affordable housing up. The government wants to build around 20 million low-cost residencies across urban and semi-urban areas in order to achieve its target of providing housing for all The Indian power sector is looking into Indians until 2022. some large-scale projects too. According to the Ministry of Coal a total of INR 250 State governments are also responsible billion will be spent over the next four for large-scale infrastructure projects. to five years in the sector. Recently, the Andhra Pradesh is building its new capital government approved the construction in Amaravati under the supervision of ten new units of heavy water nuclear of the Andhra Pradesh Capital Region reactors by the Nuclear Power Corporation Development Authority, with construction expected to begin during the month of of India.

August. By 2019, the new city is expected Following the Deen dayal to house 35,000 to 40,000 inhabitants.

Upadhyaya Gram Hyoti Yojana program, the According to the UN Economic and Social government is also Commission for Asia and the Pacific, expected to spend India’s bet on infrastructure development INR 760 billion is expected to, in part, to support a growth in its gross national product by 7.1 percent during 2017.

Infrastructure Spending

by Goverment Infrastructure Spending

by Goverment (Rs Crore)

3.96,000

The infrastructure sector is a major driver of the Indian economy

1.95,000

2.21,000

1.25,000

2014-15

2015-16

2016-17

2017-18

Source: UN HABITAT, IBEF, INDIABUDGET, MARKETSMITH

India Cement and Construction Materials Journal

June/July 2017

7

feature The opportunity for cement manufacturers

"With the government moving ahead on its agenda of transformative economic growth, the cement industry and the company are expected to perform well”, said ACC in a statement to the Bombay Stock Exchange.

rural demand constitutes 38-40 percent of the total. Ladiwala believes that strong investment in infrastructure, coupled with a favorable monsoon, will result in positive returns for cement companies.

The manager director of UltraTech Cement seems upbeat with the possibility. “The government's thrust on infrastructure is increasing, with the pace gaining in the construction of roads, highways and even irrigation, water supply and water management”, said K K Maheshwari. His company is expected to reach a capacity of 91 million tons per year, as soon as it closes the deal for Jayprakash Associates’ cement assets, consolidating its position as the biggest cement producer in India.

Cement demand to grow during 2017-18

With all this in mind, the ratings agency ICRA recently predicted cement demand to grow by around four to five percent during 2017-18. Last March, cement volume begun its recovery from the impact of demonetization, growing by 17.5 percent month-on-month to 25.2 million tons.

With so many large projects being implemented, cement manufacturers are expected to cash in on rising demand.

According to figures advanced by Maheshwari, low-cost housing alone is expected to absorb a total of 20 million tons of cement this year, a 40-percent increase compared to 2016. Overall demand by housing is expected to close on 170 million tons, he added.

In a recent report by India Ratings and Research (Ind-Ra), the rating agency suggests that cement demand in India will grow by four to five percent during the current fiscal year, thanks to government spending on infrastructure and housing construction on rural areas.

Sanjay Ladiwala, chairman of the Cement Stockists & Dealers Association of Bombay, also believes that infrastructure investment will be crucial for cement manufacturers in the future quarters. He stresses how the real estate sector, which accounts for 18 to 20 percent of the total demand for cement in India, has been stagnant or even falling in the last quarters, while

Cement demand in India will grow by four to five percent during the current fiscal year

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India Cement and Construction Materials Journal

However, companies will also have to look out for some risks in the future. Recently, the Union government decided to significantly reconfigure the taxation landscape in India, creating the Goods and Services Tax (GDT).

Cement ended up in the highest threshold of the new tax, with a rate of 28 percent.

Commenting on the matter, Sushil Agarwal, director and CFO of Grasim Industries said: “While a lot of infra and development projects are on-going and many are in the pipeline at the national level, categorization of cement in the lower bracket would have helped to offer cost effective construction rate for such upcoming projects.�

The Modi administration seems committed to a policy of investment in infrastructure, promoting the construction of new expressways, ports, power plants, and affordable housing. The 2017 Union Budget is a testimony to that commitment, pushing government spending in infrastructure further than in previous years.

Judging by the reaction of major cement manufacturers like ACC and UltraTech and of market watchers like Ind-Ra, it is easy to assume that cement demand by infrastructure projects will bring a more

vibrant outlook to the sector. After all, demand is expected to grow by 4-5 percent in the current fiscal year. However, some precautions may be necessary, more specifically the challenge posed by the 28-percent rate imposed on cement by the new Goods and Services Tax.

The Modi administration seems committed to a policy of investment in infrastructure

Growth in the Revenues from contruction equipment (USD billion) 7

CAGR: 2.34%

6 5 4 3 2 1 0

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY20E

Source: The Boston Consulting Group

India Cement and Construction Materials Journal

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feature

Packaging cement in a sustainable way A Life Cycle Assessment (LCA), carried out by the German PE International AG and commissioned by the Austrian machinery supplier Starlinger, compared sewn sacks made in China and kraft paper sacks made in Saudi Arabia with AD*STAR sacks which were produced in both countries respectively.

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June/July 2017

India Cement and Construction Materials Journal

India Cement and Construction Materials Journal

June/July 2017

11

feature

12

Global warming potential

1.0 .8 Fresh water use

Ozone layer deplention potential

.6 .4 .2

AD

Primary energy demand

ar

STAR

lin

ge

r&

Co

%

PP 50

PP 100%

St

In the course of the study the entire life cycle of the cement sacks, i.e. from sack production and transport to the cement plant, the use phase of the sacks, to their end-of-life phase, was reviewed. All analysed sacks had a filling capacity of 50 kg cement.

Adstar cement sacks Vs Paper cement sacks in China

@

ement packaging is a significant factor for cement producers and sellers regarding product protection, shelf appearance, cost margins, and sustainability targets. An independent study compared the environmental impact of paper cement sacks, sewn cement sacks made of recycled polypropylene tape fabric, and hot-air welded AD*STAR cement sacks made of coated polypropylene tape fabric.

. Gm

Acidification potential AD*STAR* PP 50% PP 100%

b H.

Photochemical ozone creation potential

Source: Starlinger

In China, sewn woven sacks made of polypropylene tape fabric are the most widely used packaging for cement.

september June/July 2017 - october India2015 Cement INDIA andCEMENT Construction & CONSTRUCTION Materials MATERIALS Journal MAGAZINE

The sacks are manufactured including varying shares of recycled polypropylene as input material, sometimes up to 100

China: low quality impairs performance In China, the world’s biggest cement producer, around 20 billion sewn cement sacks made of polypropylene tape fabric with recycled content are produced per year.

In the study, sewn coated polypropylene sacks made of 50 percent virgin material mixed with 50 per cent recycled material, and sacks made of 100 percent recycled material were analysed because these are currently the most widely used sack types for packaging cement in China.

The sacks have an extremely thin coating and are sometimes partially not coated, which reduces their shelf life. Together with non-existent coating, the sewn top and bottom seams account for increased cement losses during the entire transport chain.

percent. The recycled material used to produce the sacks is in most cases severely degenerated – it has been reused various times, and often contains high quantities of mineral fillers from previous applications. This means the sack fabric is rather brittle and breaks easier. To increase the sack strength, the fabric weight must be increased. In addition, the sewing process further weakens the material by up to 50 per cent.

The study concludes that AD*STAR sacks produced in China create lower environmental burdens in each impact category than the sewn sacks made of polypropylene with shares of recycled

To increase the sack strength, the fabric weight must be increased

content. The latter show significantly higher impacts for ozone depletion, blue water consumption, land occupation and primary energy from renewable resources than AD*STAR sacks.

Regarding the global warming potential, the environmental impact during the use phase of the sacks is strongly dependent on the breakage rate. With breakage rates of up to 4.4 percent the sewn polypropylene sacks with recycled content have a substantially higher environmental impact than AD*STAR sacks. More cement is lost during the use phase and has to be compensated by additional production.

Changing over to AD*STAR sacks would not only reduce CO2 emissions caused

Two- and three-layer kraft paper sacks in block bottom shape are the predominant cement packaging on the market in Saudi Arabia.Although the sacks are mostly produced in the country, the raw materials for the sacks –paper and glue – have to be imported from Europe.

INDIA CEMENT India & CONSTRUCTION Cement and Construction MATERIALS MAGAZINE Materials september Journal -June/July october 2015 2017

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feature

Considering the current investments in modernizing the Chinese cement sector, the use of AD*STAR sacks which are produced automatically on sack conversion lines and allow fully automated handling of the packaged cement would seem a prudent step.

Adstar cement sacks Vs Paper cement sacks in Saudi Arabia Global warming potential

1.0 .8 Fresh water use

Ozone layer deplention potential

.6 .4 .2

2-laye r 3-laye r

ar @ St

June/July 2017

li n g

er

&C

o.

Gm

Acidification potential AD*STAR* 2-layer kraft paper sack 3-layer kraft paper sack

Photochemical ozone creation potential

Source: Starlinger

Saudi Arabia: Import of kraft paper drives up environmental impact In Saudi Arabia, one of the biggest producers

14

AD STAR

.

Primary energy demand

bH

during production and thus relieve the environment; it would also contribute to theautomatization of the entire cement filling and transporting chain. Currently, the manufacture and handling of the sewn woven PP sacks involves a lot of manual activities – starting with the sewing of the sacks in the production phase and the resulting size differences that cause problems on automatic filling lines, from putting them onto the spout during the cement filling process, to stacking, storing and transporting.

India Cement and Construction Materials Journal

and exporters of plastic granulates worldwide, paper and glue imported from Europe are used for the production of cement packaging. Mostly, two- and three-

Tr a n s p o r t a t i o n contributes more to the global warming potential of paper sacks than to the AD*STAR sacks produced in Saudi Arabia because the raw materials for the paper sacks have to be shipped.

In total, the two-layered paper sacks produced in Saudi Arabia perform worst in terms of global warming potential, while the AD*STAR sacks show the lowest values.

For Saudi Arabia, switching over to the more robust AD*STAR sacks would not only prevent the loss of countless tons of cement caused by sack rupture, but also greatly reduce raw material input for sack production and avoid long transport routes. In addition, the entire value created by both raw material and sack production would remain within the country.

layer kraft paper cement sacks can be found on the market; these sack types were also used for analysis in the study.

For both China as well as Saudi Arabia, AD*STAR sacks do not only show the lowest values regarding global warming potential (also known as

AD*STAR sacks produced in China create lower environmental burdens

carbon footprint), they are also the environmentally friendlier packaging in terms of acidification potential (acid rain), ozone depletion potential, photochemical ozone creation potential (causes summer smog), as well as energy and fresh water consumption.

The study was reviewed by an independent review panel, consisting of representatives from the internationally operating German inspection company Dekra, which held the chairmanship of the panel, as well as Lafarge France and Canada, Dr. Werner Environment & Development from Switzerland, and the Austrian trading company Sack Agency.

The global warming potential of both AD*STAR sacks and paper sacks in Saudi Arabia is dominated by emissions during the use phase of the product, which is, as discussed before, strongly dependent on the breakage rate of the cement sacks. As the paper sacks show higher breakage rates than AD*STAR sacks – 2 to 3 per cent are very common, under rough conditions they can be even higher – more cement is lost, resulting in a higher impact.

The production phase represents the second largest driver, in this case especially with regard to the AD*STAR sacks, while the production phase of paper sacks has less impact.

India Cement and Construction Materials Journal

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feature

ACC and Ambuja

Cement join forces to take over

Indian cement a

16

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India Cement and Construction Materials Journal

June/July 2017

17

feature fter nearly 12 years since Swiss cement giant Holcim made its way into India, having acquired both its largest cement firms – ACC and Ambuja Cements – the parent company has set the ball rolling for a possible merger of the two.

In 2015, Holcim had merged with French Lafarge to create LafargeHolcim. In June 2016, Ambuja had bought Holcim India’s 24 percent stake in ACC, which resulted in the latter becoming Ambuja’s subsidiary with a 50.05 percent stake. Now, LafargeHolcim owns 63.6 percent of Ambuja Cements. Divisive opinions state that the merger would mean an end for ACC, which is one of the oldest cement companies in the country.

A paradigm shift for the Indian cement industry

Both companies’ boards have initiated studies to explore the possibility of a merger, while a special committee of directors, majorly independent, has been set up to consider the matter. However, no decision has been taken yet.

Ballyconnell cement plant

ACC and Ambuja capacities in 2016 (million/tons)

ACC 33.41

Post-merging, the combined entity would likely save about 10 percent in operating expenses

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June/July 2017

Ambuja 29.65

Source: ACC and Ambuja Financial Statments

Both ACC and Ambuja are part of the conglomerate LafargeHolcim, and a merger between the two has been long speculated about. Ambuja cements holds a 50 percent stake in ACC, and while LafargeHolcim holds a 4.48 percent stake

India Cement and Construction Materials Journal

through unit Holderind Investments, Holderind holds about 63.11 percent of Ambuja Cement. If the merger eventually materializes, it’ll be the latest in a string of large mergers and acquisitions in the Indian cement sector. In the past year,

ACC has a total capacity of 30.7 million tons

with the lowest production cost, the same report mentioned.

the market has seen a merger between Dalmia Bharat and OCL India, whereas Jaypee Group agreed to sell its cement assets to larger rival UltraTech Cement.

to 7.4 percent in 2016, according to an early May report. They are, however, one of the most profitable cement makers,

As the second largest cement producer in the world, India is expected to see its cement production capacity reach 550 million tons by 2025. However, the country’s cement sector has seen a wave of consolidation over the past year.

Debt-grudged infrastructure company Jaiprakash Associates agreed to sell their cement assets to UltraTech in February 2016, but pending approvals have delayed the deal. In November, Dalmia Bharat and OCL India approved a plan to merge both entities. In January this year, JSW Cement bought ACC’s entire stake in Shiva Cement.

ACC has a total capacity of 30.7 million tons and runs 17 cement manufacturing sites and 50 concrete plants in India.

Ambuja Cements has a total capacity of 29.65 million tons, with five integrated cement manufacturing plants, and eight cement grinding units across the country.

ACC, Ambuja, UltraTech Cement and Dalmia Cement command about 40 percent of India’s total cement market, representing a total capacity of more than 420 million tons. ACC is the second largest cement company in India, with about 10 percent market share.

Ambuja Cement, the third largest cement manufacturer in India, has added only 1.7 million tons of total capacity in the past three years, resulting in its market share declining from 8.5 percent in 2013

Ambuja cement factory - Gujarat

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feature

Ambuja Cement Plant

Considering all this, it is believed that the merger can and will unlock synergies for both companies across many fronts– profitability, marketing, distribution, sourcing, among others. Although ACC generated an EBITDA (earnings before interest, tax, depreciation, and amortization) of around INR 400 a ton in March 2017, Ambuja generated around INR 597 a ton at a time when rising costs had been a concern.

Therefore, analysts say that the merger could help reduce operating costs.

ACC and Ambuja Cement Revenue (million)

35000

ACC Cement Revenue

Ambuja Cement Revenue

30000 25000 20000 15000 10000 5000 Jan-Mar ‘16

For the year ended December 2016, Ambuja Cement reported a consolidated revenue

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Apr-Jun ‘16

Jul-Sep ‘16

Oct-Dec ‘16

Jan-Mar ‘17

Source: ACC and Ambuja Financial Statments

While the merging announcement came after market hours from both companies, ACC shares gained nearly 2 percent to INR 1,655.30, while Ambuja’s share gained around one percent to close at INR 246.30 apiece. In terms of evaluation, ACC is trading at an enterprise value of USD 136 a ton, while Ambuja is trading at USD 153 a ton on CY 2017 estimated capacities. If Friday’s stock prices were to be considered, one share of ACC will fetch 6.7 shares of Ambuja.

India Cement and Construction Materials Journal

Crunching the numbers

For the year ended December 2016, Ambuja Cements reported a consolidated revenue of Rs 20,093, while ACC reported a consolidated revenue of INR 11,167. The stocks of cement manufacturers ACC and Ambuja Cements would likely generate high investor interest in today’s trading, given the long-term operational benefits from a proposed merger of the two, and the steep gap in valuations between both companies.

According to specialists, it makes logical sense to operationally merge ACC into Ambuja Cements, given the structural benefits of the equity holding: Ambuja is already the holding company for ACC. Post-merging, the combined entity would likely save about 10 percent in operating expenses. This would be reflected in logistics costs (reduction of lead distance from the plant to relevant markets served), manpower, and taxes. Secondly, the blended realizations of the merged entity are likely to improve. This should be achieved by aggressively pushing the stronger brand in a given region.

“One of the major benefits of the merger is the improvement in realizations. The merged entity would follow a strategy of pushing aggressively the ACC brand in regions where it’s strong, and pushing Ambuja brand where it’s strong. This should enhance the blended realizations”, says Nitin Bhasin, cement analyst at Ambit Capital.

Other analysts also point out that the merged entity’s EBITDA per ton is expected to increase by about INR 60-70, enhancing the earnings. ACC generates an EBITDA per ton of INR 600, while Ambuja generates INR 800 per ton.

They also point out that, after taking into account the shareholding structure among Lafarge, Ambuja, and ACC, the merger swap ratio is expected to be such that, for every ACC share, shareholders would get 6.7 shares of Ambuja Cements.

They also mentioned that equity dilution in Ambuja Cements is expected to be 64 percent, if one takes into account treasury shares, or 32 percent, if one cancels said treasury shares.

Shree Cement’s prices have risen more than three times in the same period.

Due to this, ACC and Ambuja stocks are trading at an EV per ton of USD 130-160, based on possible FY 2018 earnings. By contrast, UltraTech and Shree Cement are trading at an EV per ton of USD 270-280.

The coming quarters will be decisive, as this discount is expected to come down after the merger, and the combined entity would receive higher valuation from the market. In their latest commentary, LafargeHolcim, ACC and Ambuja’s parent company, told the press that it clocked 13 percent volume growth globally, and is confident of an improvement in cement demand in the second quarter of the current fiscal year.

All in all, instructions are still unclear on whether the merging will happen as we know it, and if the speculations turn out to be true. The merging makes logical sense, given the fact that some

In the past 5 years, ACC and Ambuja Cements share prices rose in the range of 40-70 percent

expenses will see costs decrease and new synergies be created, but further down the line, current analysis can’t foretell if the merging will be as successful as early market predictions believed it would be. The Indian cement industry is everchanging, and so has to be the market that surrounds it.

Nonetheless, in the past five years, ACC and Ambuja Cements have expanded at a much slower rate than UltraTech, Shree Cement, or Dalmia Bharat, and the growth in the share price of the foreignowned companies has accordingly trailed that of its rivals.

In the past 5 years, ACC and Ambuja Cements share prices rose in the range of 40-70 percent, while UltraTech and

ACC cement plant in Barmana Himachal

India Cement and Construction Materials Journal

June/July 2017

21

COUNTRY SNAPSHOT

CW RESEARCH

Bangladeshi cement market expanding with public infrastructure investment

S

upported by a combination of public construction works and real estate projects, the Bangladeshi cement market is poised to meet an increase in consumption. Despite a highly fragmented industry and its strong dependency on clinker imports, the outlook through 2021 remains promising.

Public and real estate projects support a booming cement consumption

The 2017 Bangladesh Cement Market Report points to an expansion in the domestic cement market. CW Research

22

June/July 2017

predicts a consumption increase of nine percent per year on average through 2021.

The solid increment in cement

Cement consumption has been driven by public works and real estate development projects consumption in the country has been driven by public works in the infrastructure segment and real estate

India Cement and Construction Materials Journal

development works propelled by high population growth and urbanization. The Bangladeshi government is actively seeking to improve national construction through a combination of building new roads and upgrading existing infrastructure. Public works are also favored for their political impact in improving conditions.

Overall, public infrastructure projects account for 35 percent of the country’s total cement consumption. On the private side, the individual, small-scale construction market makes for 40 percent of the total.

The remaining 25 percent is covered by real estate developers.

Cement capacity is projected to surpass 35 million tons

The Bangladeshi cement industry is highly fragmented and counts on more than 40 players of various degrees of industrial size and professionalism. The national shortage of quality limestone reserves translates in the availability of a single integrated cement plant operating in the country: Lafarge Surma. Nevertheless, this plant is importing limestone from India via a conveyor belt across the border.

The Bangladeshi cement market is heavily dependent on clinker imports

All other cement manufacturers operate grinding plants using imported clinker.

These grinding stations range widely in size and commercial sophistication, from small mini-mills to enterprise-level grinding plants; capacities range between 0.1 million tons to 5.2 million tons.

With such a high dependency on clinker imports, the Bangladeshi cement market is highly susceptible to fluctuations of clinker supply and prices. Therefore, the government has maintained low import duties to foment some domestic value added component in form of grinding, rather than just importing finished cement. Clinker imports are mostly sourced from China, Thailand, Vietnam and Malaysia. Nonetheless, exploration continues to try and identify domestically viable limestone reserves to be able to support clinker production locally.

For 2017, cement capacity is forecasted to reach over 35 million tons. Cement manufacturers, including S. Alam Cement Mills, Aman Cement Factory, Olympic Cement, Eastern Cement, Aramit Cement, Alam &Co., Chhatack Cement, among others, are providing an additional 3.4 million tons of cement to the existing capacity in the coming years. Cement production units are concentrated close to Dhaka and Chittagong, as these cities are the largest consumers in the domestic market.

Bangladesh Cement production and consumption (million/tons) Cement Production

Cement Consumption

18 16 14

About the report CW Group Research’s Cement Industry Country Report series meets the countrylevel cement market research needs of small and large businesses, analysts and governments. The reports cover cement volume trends in detail, analyzing trade flows, cement demand and production (historical and outlook), per capita consumption, and the competitive landscape, including company profiles, cement production facility details, including past and announced brownfield production increases and greenfield projects.

Cement Industry Country Reports also cover demand drivers, including macroeconomic and construction sector dynamics, for the specific country. Industry reports are presented in an objective, easy to understand format, providing hardto-find answers to top market research questions.

The comprehensive CW Research’s Bangladesh Cement Market Report provides an in-depth and data-oriented analysis of the cement market in Bangladesh. This cement industry report provides a detailed review of the cement market in Bangladesh, with regional perspectives, discussion of demand drivers, as well as cement tonnage volume and price trends in the country, which provides a national five-year demand forecast.

More information about the report can be found at http://www.cwgrp.com/research/ research-products/countr y-reports/ product/206-bangladesh-cement-marketreport-forecast-through-2021 For more information and placing an order, please contact Liviu Dinu, Market Services & Marketing Consultant, CW Group (Europe), by phone at +40-744-67-44-11, or e-mail at ld@cwgrp.com.

12 10 8 6 4 2 0

2017E

Source: CW Research

India Cement and Construction Materials Journal

June/July 2017

23

COUNTRY SNAPSHOT

CW RESEARCH

Sri Lanka: a rebounding cement demand supported by infrastructure investment ollowing a turbulent period plagued by war, Sri Lankan cement consumption has risen over the past few years. The country’s need for reconstruction works has been the main driver behind an increasing cement demand, which will have to rely on imports to be met.

Investment in infrastructure supports increasing cement consumption

The 2017 Sri Lanka Cement Market Report indicates the country’s cement industry has recorded a solid increase over the past few years. CW Research reports a robust rise of 13 percent per annum on average, between 2010 and 2016.

Even though cement grinding capacity is projected to increase, imports are expected to rise 24

June/July 2017

Such an upward trend in cement consumption is driven by a growing cement demand, in turn boosted by investment in infrastructure and the country’s urgency for reconstruction work, after the long civil war ended in 2009. However, demand started to slow in 2015 as the newly elected government suspended work on largescale infrastructure projects, following

corruption concerns around the tendering process involving Chinese bidders.

Nevertheless, in 2016, cement demand levels improved after the government announced the construction projects could proceed based on the binding nature of the Chinese construction contracts. Following the decision green-lighting work on infrastructure projects, cement demand reached approximately seven million tons.

CHART: CEMENT DEMAND (2010-2015)

LH-axis: Apparent cement consumption (mn tons); RH-axis: Cement consumption per capita (kg)

Apparent consumption

Consumption per capita

7

350

6

300

5

250

4

200

3

150

2

100

1

50 2010

2011

Source: CW Research

India Cement and Construction Materials Journal

2012

2013

2014

2015

About the report CHART: Baseline and new capacity

CW Group Research’s Cement Industry Country Report series meets the country-level cement market research needs of small and large businesses, analysts and governments.

The reports cover cement volume trends in detail, analyzing trade flows, cement demand and production (historical and outlook), per capita consumption, and the competitive landscape, including company profiles, cement production facility details, including past and announced brownfield production increases and greenfield projects.

(mn tons)

New Cement Capacity

Baseline Cement Capacity

8 7 6

Millions

5 4 3 2 1 2010

2011

2012

2013

2014

2015

2016E

2017E

2018E

2019E

2020E

2021E

Source: CW Research

Cement imports expected to rise due to insufficient domestic production

additional cement production capacity will still be insufficient to meet domestic demand.

Cement imports are, thus, expected to rise.

Sri Lankan manufacturers’ cement production is provided by one integrated and three grinding cement manufacturing plants, as well as several import terminals.

The cement production units in the country are controlled by Tokyo Cement, HeidelbergCement, Siam City Cement and Ultratech, following recent M&A (Mergers and Acquisitions) activity in the sector.

Even though cement grinding capacity is projected to increase 14 percent by 2021, the

As the fourth largest cement importing market in the world, Sri Lanka receives substantial supplies of cement and clinker from multiple countries, including India, Pakistan, Indonesia, Malaysia and Vietnam. In the long run, given that no new integrated cement production capacity has been announced, manufacturers will remain dependent on imported clinker for their cement grinding operations.

Consequently, Sri Lanka is expected to remain a major importer of cementitious materials in the coming years.

Cement consumption has been driven by public works and real estate development projects

From 2016 to 2021, cement demand levels will continue to be supported by infrastructure projects and growing housing market in Sri Lanka. Construction activity is expected to grow at an annual average of eight percent over the next few years, encouraged by increasing homeownership, large government infrastructure projects, and surging demand for high-rise buildings.

Cement Industry Country Reports also cover demand drivers, including macroeconomic and construction sector dynamics, for the specific country. Industry reports are presented in an objective, easy to understand format, providing hard-to-find answers to top market research questions.

The comprehensive CW Research’s Sri Lanka Cement Market Report provides an in-depth and data-oriented analysis of the cement market in Sri Lanka. This cement industry report provides a detailed review of the cement market in Sri Lanka, with regional perspectives, discussion of demand drivers, as well as cement tonnage volume and price trends in the country, which provides a national five-year demand forecast.

More information about the report can be found at http://www.cwgrp.com/ research/research-products/countryreports/product/207-sri-lankacement-country-report-2017 For more information and placing an order, please contact Liviu Dinu, Market Services & Marketing Consultant, CW Group (Europe), by phone at +40-744-67-44-11, or e-mail at ld@cwgrp.com.

India Cement and Construction Materials Journal

June/July 2017

25

CEMENT MARKETS

CW Research

CEMENT VOLUMES In Latin America, domestic demand continued to suffer from lack of consumer confidence and low government spending in April. In Brazil, the main regional market for cement, demand continued to be hindered by political instability, despite low domestic prices. Brazilian demand for cement reached 4.0 million tons in April, down 15.5 percent on a yearly basis, and 15.3 percent on a monthly basis.

In Latin America, domestic demand continued to suffer from lack of consumer confidence and low government spending in April.

Colombia and Peru saw a similar trend than that of Brazil, recording lower year-on-year demand and production. Both countries continue to suffer from a slowdown in housing and infrastructure investments. Colombia recorded a 16.9 percent month-on-month decline in demand in April, while Peruvian demand fell 5.8 percent on a monthly basis.

Argentina has been a stand out in the region, with its domestic cement demand having grown by 11.1 percent in April on a yearly basis. The domestic cement market has been benefiting from higher public expenditure in infrastructure at a national and regional level.

In Europe, Spain is strengthening their position as an exporter, with year-to-date demand growing 5.0 percent, and year-to-date production expanding 13.3 percent. In April, cement demand in the country fell 8.3 percent year-on-year, affected by Easter, which usually temporarily drives down consumption. In Italy, production fell 8.3 percent year-on-year, and 10.0 percent year-on-year, reaching 1.7 million tons.

Asia faced mixed trends in April, with production expanding year-on-year in Vietnam, Korea, China and Thailand, but retracting in India. When it comes to demand, Indonesia and Korea recorded higher yearon-year demand, while demand in Japan and Thailand was unfavorable for the cement manufacturers.

In India, cement production declined 5.7 percent on a monthly basis, and 3.7 percent on a yearly basis. Cement demand in the country has been conditioned by high cement prices in the industry, and in some regions, consumers have resorted to cement imports to meet local demand.

In China, construction activity continued show a strong performance, propelling production increases in the northeast and southwest of the country. Year-to-date cement production in China is up 0.5 percent, when compared to the first four months of 2016, reaching 662.8 million tons.

In Thailand, cement demand continued to be hindered by the flooding in the south of the country, which occurred in January 2017.

Domestic consumption fell 25.2 percent on a monthly basis reaching 2.4 million tons. On the other hand, production has grown 2.5 percent year-on-year in April, sustained by high demand from neighboring Cambodia and Vietnam.

February 2017 cement production – YoY change (%)

Cement production April 2017 YoY %

19.7%

20% 7.0%

11.0% 11.1%

8.4%

10%

2.3% 2.5% 2.9%

2.6%

0% - 0.7% - 8.3%

- 7.9%

Thailand

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

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June/July 2017

India Cement and Construction Materials Journal

Argentina

Korea

Source: CW Research

Indonesia

Japan

Saudi Arabia

Peru

- 13.7% - 13.7% - 13.4%

Pakistan

Spain

Japan

Korea

Vietnam

Thailand

India

China

Italy

Peru

Colombia

Saudi Arabia

Source: CW Research

-15.5% - 14.9%

Colombia

-20%

-18.4%

Brazil

-12.0% -11.0%

-10%

-8.3%

Spain

-3.7%

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 (%)

YTD (%)

CEMENT CONSUMPTION 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

TABLE AVAILABLE IN THE CEMWEEK LM MoM (%) YoY (%) YTD MAGAZINE PRINT EDITION.

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.

WWW.CEMWEEK.COM/SUBSCRIBE

CEMENT EXPORTS MOM (%)

TABLE AVAILABLE IN THE CEMWEEK LM MoM (%) YoY (%) YTD MAGAZINE PRINT EDITION.

CEMENT IMPORTS (million tons) YTD (%)

Country

YTD (%)

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

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27

CEMENT ENERGY MARKETS

CW Research

Energy Prices Update COAL: The average coal price for April 2017 closed at $77.02 per ton, increasing 45.9 percent YoY as

compared to April 2016’s price of $52.79 per ton. It increased by 1.8 percent when compared to March 2017’s price of $75.70 per ton.

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

Colombia exported

Australia Newcastle

Indonesian HBA

South Africa Richards Bay

120 110 100 90 80 70 60

US petcoke exports declined by 13.1 percent to 3.2 million tons in April 2017 when compared to the previous month, and expanded 10.2 percent when compared to April 2016.

50 40

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

COAL TRADING VOLUMES: Global trading volumes for the five major coal countries totaled 35.97 million tons in April 2017, declining by 61.1 percent in comparison with the 95.52 million tons recorded in March. With the exception of South Africa and Colombia, all countries recorded an output expansion when compared to the previous month.

PETCOKE: US petcoke exports declined by 13.1 percent to 3.2 million tons in April 2017 when compared to the previous month, and expanded 10.2 percent when compared to April 2016. The US export price for petcoke in April 2017 averaged at $70.15 per ton, decreasing 2.9 percent as compared to March’s price of $72.22 per ton, and up by 92.5 percent when compared to April 2016’s price of $36.44 per ton.

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

Rolling 12-month average

70 60 50 40 30 20 10 0

Source: customs data

NATURAL GAS: The US Henry Hub spot price traded at $3.10 per MMBTU in April 2017, a 7.6 percent increase when compared to March 2017, and growing

61.5 percent as compared to April 2016’s price of $1.92 per MMBTU. Prices in Europe decreased 2.2 percent MoM, reaching $5.24 per MMBTU in April 2017.

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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 %

LM

MoM (%)

YoY (%)

YTD

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 (%)

US PETCOKE EXPORTS PRICES MOM(%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

WWW.CEMWEEK.COM/SUBSCRIBE

WWW.CEMWEEK.COM/SUBSCRIBE

PETCOKE - GLOBAL EXPORT PRICES (USD/ton) - Feb 2017

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

Country

LM

CEMENT ENERGY MARKETS

CW Research

MoM (%)

YoY (%)

YTD

YTD %

Country

LM

MoM (%)

YoY (%)

YTD

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

NATURAL GAS PRICES (US$/mmBtu) - Feb 2017 COAL EXPORT PRICES MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. WWW.CEMWEEK.COM/SUBSCRIBE

Country

LM

MoM (%)

YoY (%)

YTD

YTD %

NATURAL GAS PRICES MOM (%)

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION. WWW.CEMWEEK.COM/SUBSCRIBE

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

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29

cement market and competition

M

arket and competition

Dalmia Cement bidding for limestone block Dalmia Cement has secured the place of top bidder for a limestone block in the state of Chhattisgarh, in India.

An official statement from the Chhattisgarh State Government has confirmed that Dalmia Cement is the preferred bidder for the Kesla II limestone block, located in the Raipur District.

Prism Cement securing limestone reserve Prism Cement is close to securing a limestone reserve in the Satna District of the Indian state of Madhya Pradesh.

The company recently secured a Letter of Intent from the Madhya Pradesh government, promising Prism Cement a block of cement-grade limestone near the villages of Chulhi and Majhiyar, in the district of Satna.

The reserves contain around 23.6 million tons of limestone. The mining lease is now dependent on completion of formalities, and may extend for 50 years from the date of acquisition.

The application for this mining lease was made earlier by Prism Cement, and was being analyzed by the state government.

Under the Indian law, the mining lease will remain captive to Prism’s cement plants in Satna.

The block has 215 million tons of reserves, with an estimated mineral resource value of INR 10,367 crore.

Under Dalmia’s bid, the state is expected to collect a total of INR 11,894 crore, including INR 9,968 crore from the auction alone, an income royalty of INR 1,720 crore, and two transfers of INR 172 crore and INR 34.4 crore to the District Mineral Foundation and the National Mineral Exploration Trust, respectively.

30

June/July 2017

Cement demand to rise Ultratech believes that cement demand in India will increase during the current fiscal year.

According to K K Maheshwari, cement managing director of Ultratech, cement demand in India will increase by four to six percent during 2017-18.

Maheshwari believes that demand will be boosted mainly by higher investment in infrastructure and low-cost housing.

The managing director explained that, for now, government expenditure in

India Cement and Construction Materials Journal

infrastructure remains the largest support on cement demand in India, accounting for 20 to 25 percent of total demand.

Housing represents 60 to 65 percent of demand, with the remaining coming from the industrial and commercial sectors.

Housing and infrastructure have both been performing well and, for Maheshwari, it is just a matter of time until demand in the remaining sectors picks up. The “Housing for All” program being pushed forward by the Modi Administration will likely have a strong impact in the sector as well.

Cement producers prefer imported coal Cement manufacturers in India continue to rely on imported coal in spite of lower domestic prices.

Higher cement prices in Andhra Pradesh push builders to imported products Construction companies in the Indian state of Andhra Pradesh will start importing cement following a hike in prices.

After many complaints regarding the “unfair” price hikes in the state of Andhra Pradesh, construction companies from Vijayawada and Gantur have decided to import cement from China, South Korea, Sri Lanka, and Bangladesh.

Cement from those countries is available at INR 250 per ton per 50 kilogram bag, while in Andhra Pradesh, the price

Cement demand to rise by four to five percent in FY2017-18 Rural demand will drive cement sales in India over the next quarter, with results for the last quarter of FY 2016-17 displaying mixed results. After suffering a strong hit from demonetization, cement demand managed to increase by 1.1 percent during January, only to drop by one percent in the following month. As the negative effect of demonetization declines, demand is expected to pick up in India. ACC and Ultratech have already shown strong results for the first quarter, bringing good prospects for the upcoming quarters.

reached INR 400 during the last two months. A delegation of representatives from the construction sector has been sent to those countries. Cement can be imported into the region through the Krishnapatnam port.

Real estate developers have been fighting what they consider “artificial scarcity” created by cement companies in the region. A Joint Action Committee has been created by the Andhra Pradesh Real Estate Developers Association, Capital Region Builders Association, and Confederation of Real Estate Developers Association to act on the subject. However, the committee complains that the state government has been deaf to its appeals.

"The major factor is the rural demand, which constitutes nearly 38-40 percent.

Demand in the rural segment is steady, which is why we are seeing positive signs in the growth of figures", said Sanjay Ladiwala, chairman at the Cement Stockists & Dealers Association of Bombay and Rakesh Arora.

Going into the next quarter, ICRA also believes that demand will certainly pick up, as the influence of demonetization fades away. Higher expenditure in the infrastructure sector, rural areas, and in the affordable housing strata will also prop up demand, leading the ratings company to forecast a four to five percent rise in cement sales by the end of the current fiscal year.

Indian companies normally have to choose between imported petcoke, imported coal, or domestic coal for their fuel needs. The price of the first two sources has been rising lately, while the latter is relatively cheaper.

However, due to several factors, manufacturers continue to prefer sourcing coal from outside of India.

There are three main reasons explaining this preference. First, the major coal producer in India, Coal India, keeps failing to meet its annual production target, leaving a tight supply, especially in the peak season, between October and March.

Some companies manage to buy coal through auction, while others secure coal linkages, but even then there is a certain risk of unavailability.

The second factor is quality. The gross calorific value of imported coal is normally much higher that the domestic one. Australian coal is normally around 7,500-8,000 kilocalories per kilogram while Indian coal stands between 3,500 and 3,800 kilocalories per kilogram.

Finally, many cement facilities, especially in Southern India, are located near the coast, making it cheaper to buy imported coal through the ports than domestic coal, which is transported from inland.

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31

cement M&A AND FINANCE

M

&A and finance

India Cements to increase capacity utilization India Cements wants to focus on the improvement of its capacity utilization.

According to N Srinivasan, the vicechairman and managing director of the company, capacity utilization rose from 63 percent to 70 percent during the last year, thanks to higher exports and an increased variety in the specialty cement ranges offered by the company.

Exports rose from 3.3 lakh tons to 4.8 lakh tons during the last year. Now that the company is focusing on capacity utilization, Srinivasan believes that those will improve even more.

The higher utilization rate is helping with narrowing the net debt of the company. During the 2016-17 fiscal, India Cements was able to cut its net debt from INR 3,155 crore to INR 2,921 crore.

Prism Cement beats forecasts Prism Cement posted a lower net profit during the first quarter of 2017, which is the last quarter of the Indian fiscal year.

In the past quarter, the company had a net profit of INR 701.5 million, compared to INR 756.1 million in the same quarter last year, a decline of 7.2 percent year-on-year.

However, the company did beat the consensus forecast for the March quarter of INR 23.0 million by large margin.

UltraTech and Jaypee deal close to completion

UltraTech Cement expects closure for its deal with Aditya Birla by July.

Last year, the Aditya Birla group agreed to sell the cement sector of Jaiprakash Associates to UltraTech Cement for INR 16,189 crore. The deal is now expected to be finalized by July 2017, and includes a total capacity of 21.2 million tons in one of the biggest deals to be closed in the Indian cement sector.

32

June/July 2017

Also during the quarter, the total income of the company dropped from INR 15.9 billion to INR 15.76 billion, a slight decline of 0.9 percent.

India Cement and Construction Materials Journal

“The Jaiprakash Associates acquisition is on track and should get done sooner than later,� said the CFO of UltraTech Cement.

After the deal is concluded, UltraTech Cement will increase its production capacity by around a third to 90.7 million tons per year, giving it a comfortable margin as the largest producer in India, as well as access to new markets like Madhya Pradesh, Uttar Pradesh East, Himachal Pradesh, and coastal Andhra Pradesh.

Dalmia Bharat’s net profit increases in 4QFY2016-17

Higher cement prices in Andhra Pradesh push builders to imported products Construction companies in the Indian state of Andhra Pradesh will start importing cement following a hike in prices.

After many complaints regarding the “unfair” price hikes in the state of Andhra Pradesh, construction companies from Vijayawada and Gantur have decided to import cement from China, South Korea, Sri Lanka, and Bangladesh.

Cement from those countries is available at INR 250 per ton per 50 kilogram bag, while in Andhra Pradesh, the price

reached INR 400 during the last two months. A delegation of representatives from the construction sector has been sent to those countries. Cement can be imported into the region through the Krishnapatnam port.

Real estate developers have been fighting what they consider “artificial scarcity” created by cement companies in the region. A Joint Action Committee has been created by the Andhra Pradesh Real Estate Developers Association, Capital Region Builders Association, and Confederation of Real Estate Developers Association to act on the subject. However, the committee complains that the state government has been deaf to its appeals.

ACC and Ambuja consider merger A possible merger between ACC and Ambuja Cement was discussed during ACC’s Board of Directors’ annual meeting.

the strengths of both businesses so as to benefit all stakeholders," said the board in a statement to the Bombay Stock Exchange.

"The Board of Directors of the Company, at its meeting today, decided to commence an evaluation of a potential merger between the Company and Ambuja Cements Ltd with a view to combine

Both companies are subsidiaries of LafargeHolcim. The Franco-Swiss group controls 63 percent of Ambuja Cement, which in turn owns around 50.1 percent of ACC.

Dalmia Bharat, a cement manufacturer from India, improved its net profit by a large margin during the first quarter of 2017. Between January and March 2017, the company had a consolidated net profit of INR 184.1 crore, an increase of 94.8 percent compared to the same quarter a year before, when it posted a net profit of INR 94.8 crore.

Dalmia’s total income grew by 15.3 percent year-on-year, going from INR 2,172.4 crore to INR 2,504.7 crore.

Its total expenses increased by 13.2 percent, from INR 1,971.8 crore to INR 2,232.2 crore. In the entire Indian fiscal year, ending March 31, 2017, Dalmia Bharat had a net profit of INR 344.8 crore, compared to just INR 190.0 crore in 2015-16, a jump of 15.4 percent.

"The company delivered strong performance amid challenging market conditions. Sales volume for the year was up 20 percent year-on-year, led by focused marketing efforts. Our market share in South and North-East India improved significantly," the company said in a statement.

Jaiprakash Associates reports net loss in last quarter of the fiscal In India, Jaiprakash Associates declared a net loss during the last quarter of FY201617. The company posted a net loss of INR 1,882.4 crore, compared to another net loss of INR 1,387.3 crore in the same quarter last year.

Sales dropped by 9.2 percent year-on-year, to INR 1720.5 crore, against INR 1.893.9 crore in January-March 2016.

Recently, Jaiprakash Associates agreed to sell its cement business to UltraTech Cement.

The deal is now close to being finalized.

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cement projects and expansions

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rojects and expansions

Adani 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.

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

Dalmia Bharat planning expansions in Bihar Dalmia Bharat is building a new cement plant in the region of Sardiha, state of Bihar, as well as adding to the current grinding capacity in an existing cement plant near this new planned unit.

The Dalmia Bharat Group has decided to build a new cement plant with four million tons of capacity in the area, as well as adding grinding capacity to the existing cement plant of Godapiassal, 30

June/July 2017

"The total investment in the project would be more than INR 700 crore. With the existing capacity we had to bring cement from our other plants to meet demand," he added. “There will be additional employment of 480 people”, said M Shaoo, deputy executive director of Dalmia.

ACC constructing new plant in Telangana Cement manufacturer ACC wants to build a large cement plant in the Indian state of Telangana.

The new planned cement plant will have a production capacity of three million tons of cement per year. ACC did not provide further details, like exact location or completion date, since the project is still in the initial planning stage.

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kilometers away from Sardiha. The new plant will be built in over two phases. In the first, it will add around 1.8 million tons of capacity, while the remaining 2.3 million tons of capacity will be set in the second phase.

India Cement and Construction Materials Journal

“We have recently set up one plant in Chhattisgarh and the effort is stabilizing it. We hope to set up a similar plant here,” said Philip Mathew, chief manufacturing officer, ACC. Mathew commented that a three-millionton plant, like the one just built in Chhattisgarh, is the common standard in the current market.

JK Cement to increase production capacity for wall putty

Plans for cement plant in Himachal Pradesh are still ongoing A project for a new cement plant in Himachal Pradesh continues to linger, even after a decade has passed since it was initially proposed.

In February 2007, the state government of Himachal Pradesh signed a memorandum of understanding with Jai Prakash Associates to build a cement plant with a production capacity of

JK Cement wants to expand its cement wall putty capacity in the coming years, with plans to ramp up production of wall putty from 2 lakh to 4 lakh tons per year at its JK White plant in Katni, state of Madhya Pradesh. two million tons per year. The plant was projected to be constructed in the Chamba district, near the Baroh Shind limestone deposits.

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

Emami Cement starts new plant in West Bengal

site is being sourced from Emami’s captive quarry in Chhattisgarh.

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

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.

The new cement plant is located in the Panagarh Industrial Park, Burdwan district, and is expected to produce two million tons of cement products per year. Construction of the project represented an investment of INR 500 crore, and took 13 months.

Limestone for cement manufacturing at the

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

Recently, the company improved clinker production at its Rajasthan grey cement plants by 3.3 lakh tons through cooler modification and de-bottleneciking /upgrading processes, an investment of around INR 50 crore. With this, JK’s total capacity in the Rajasthan state rose to 54.5 lakh tons per year.

JK Cement is mainly established in North India, and is already the second-largest producer of white cement in the country.

The company exports white cement to countries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh, Sri Lanka, Tanzania, UAE, and Nepal.

UltraTech Cement commissions new slag unit UltraTech Cement recently commissioned a new slag cement unit in the Indian state of Bihar.

The new unit, located in Patliputra, state of Bihar, represents an increase of 300,000 tons per year in the company’s capacity.

"This will bolster our capabilities to meet the growing demand for slag cement from the markets of eastern India," said UltraTech in a statement.

With this new facility, UltraTech’s capacity now stands at 70.6 million tons per year.

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cement volume & pricing

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olume and pricing

CEMENT PRICES COME DOWN IN INDIA, JUNE 2017 The price of 50-kilogram cement bag has come down by INR 6 to INR 343 per unit during the current month, after two straight months of gains.

Prices decreased in North, Central, and South India. The fall was steeper in the South and more modest in the North and Central regions. On a quarterly basis, West will see the maximum improvement in cement prices followed by South and trailed

by North and Central.

In North and Central India prices came down by INR 10 to INR 320 per bag. In the West, prices actually improved by INR 2 to INR 335 per bag. In the South, prices tumbled by INR 12 to INR 368 per bag. Finally, in the East, prices rose by INR 3 per bag.

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Cement prices increase in April Average cement prices in India increased during the month of April by around 6.7 percent month-on-month in the Western and Southern markets, and by six percent month-on-month in the East.

thanks to new road projects launched by the government. Both demand and cement prices fell during the last months of fiscal year 2016-17 due to demonetarization, the retiring of INR 500 and INR 1,000 banknotes by the Union government, which resulted in poor liquidity.

Cement offtake showed robust results in the East, while remaining stable in the North, and rather weak in Uttar Pradesh due to a sand shortage. PanIndian cement demand increased by five to six percent during April, in part

“With the impact of demonetization gradually subsiding, cement prices have reached the pre-demonetization levels in April 2017 in most markets,� said Sabyasachi Majumdar, senior vicepresident and group head at ICRA Ratings.

India Cement and Construction Materials Journal

Union government discusses cement price hike with producers Cement manufacturers were called by the Union Government over the increase in cement products prices.

Cement manufacturers were summoned to a meeting with the Union Government, which took place on May 31.

The producers were warned by Nitin Gadkari, Minister of Highways, that legal actions will be taken if there are signs of collusion between them to set prices.

It is not the first time Gadkari threatens with action by the Competition Commission of India suspecting of cartel practices.

Andhra Pradesh’s government pressuring cement companies over prices The state government of Andhra Pradesh is warning cement companies over the high prices in mid-May. Following a series of price hikes, the state government has set a maximum price of INR 310 on cement bags, or INR 250 per bag for the Polavaram project and for affordable housing projects. During the negotiations with producers, the state also committed to considering several measure to help producers, including subsidies and incentives.

However, the state government observed that companies were not complying with the limit, and threatened to abandon all promised subsidies and incentives.

Minister of Welfare K Atchannaidu told companies that they had two days to comply with the limit, and promised

to send the situation to Chief Minister N Chandrababu Naidu in case they continue with their current prices.

In the meantime, P Vishnu Kumar Raju, member of the Legislative Assembly of Andhra Pradesh, criticized the decision of the state government to cap cement prices. According to the Visakhapatnam representative, there is no reason for prices to be capped so high, while the government continues to buy cement bags at INR 240 per unit.

The road sector is a major consumer of cement, especially following its focus on building concrete roads.

Top officials of Ultratech, Lafarge, India Cements, ACC, Dalmia, and Sanghi Industries were present at the meeting.

He accuses producers of asking dealers to sell cement at a public price of INR 245 per bag, while issuing inflated invoices for INR 305 per bag. Then, after the holiday of April 1-10, producers began issuing an invoice of INR 370 per bag, while asking dealers to sell at INR 330335 per unit.

Kamur Raju believes that the group of ministers decided on the maximum price based on the INR 370 invoices and not in the real price paid by customers.

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cement news

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egional news

Indian producers ask for balance in export customs with Pakistan Several companies like Ultratech Cement, Ambuja Cement, Shree Cement, Dalmia Cement, together with the cement Manufacturers Association, met with the Indian Ministry of Highways Nitin Gadkari.

During the meeting, cement makers complained of an imbalance on duties in relation to Pakistan.

Mirpur Khas, Pakistan suffers cement shortage The cement shortage has affected both the city and other nearby towns, leaving many public and private construction projects deprived of supply.

Local insiders believe that this cement shortage is the consequence of many development projects going on at the same time, including the CC Road, repair of government buildings, and several

many private construction projects. Many government departments are competing to use funds that will expire on June 30, launching new developing schemes.

Nazir Ahmed Chandio, chairman of the Government Contractors Action Committee, asked the national government to take notice of what is happening and ensure supply of cement to the market, so the development schemes can be finished on time.

Cement producers flock to Nawalparasi, Nepal

With the current duty regime, Pakistani manufacturers are able to export their surplus to India without facing any custom.

Burnpur Cement appoints However, Indian cement exports to Saurabh Pakistan areGanguly subject to as an export brand ambassador duty of almost 17 percent. Cement

Burnpur Cement Ltd for announced players asked Gadkari reciprocitythat they signed an agreement with Saurabh in the issue.

Ganguly, Former Captain of Indian Cricket Team, as the was Brand The main topictoof act the meeting Ambassador for a period of three the cement prices. Gadkari wants(3) years, effective March 11,of2016. to build 41from kilometers roads

per day in 2017-18 and is worried Under the agreement, Mr. Ganguly as that manufacturers will seize the the Brand Ambassador of the Company opportunity to increase prices, even will endorse the product and brand of as input costs remain flat.

Burnpur Cement which may help in increase of sales of the Company.

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June/July 2017

The district already harbors five cement factories out of the 17 present in Nepal.

Palpa, a neighboring district, is the site of a largest limestone mine, meaning that cement companies have good access to raw materials.

the country and although Palpa contains the limestone mine, factories cannot grow there due to physical adversities of the Hilly region, which ultimately sends all the lime to the closest factory place: Nawalparasi.”

“Nawalparasi is the perfect place for cement factories due to a litany of reasons,” said Bharat Thapa, president of Federation of Nepali Chamber of Commerce and Industry (FNCCI), “It is close to the Indian border, it is located in the central part of

Moreover, land is particularly cheap in the district, making it even more attractive.

Local inhabitants are happy with the presence of those factories, given the modern technology that has been installed to reduce noise and air pollution.

India Cement and Construction Materials Journal

Nepal producers struggle with clinker shortage Cement manufacturers in Nepal are dependent on clinker imports from India for 35 percent of their needs. Due to lack of railway tracks, Indian dealers have not been able to properly supply Nepalese producers with clinker.

Bestway Cement drops acquisition of Dewan Cement

Bestway Cement signed a non-binding memorandum of understanding to acquire Dewan Cement last February.

Pakistani manufacturer Bestway Cement will no longer acquire Dewan Cement.

The decision to abandon the deal leaves either to one of the major domestic companies to increase their capacity, or to a possible Chinese penetration in the Pakistani market.

Dewan Cement has an annual capacity of 2.88 million tons, equivalent to 6.1 percent of the 45.6 million tons of installed capacity in the Pakistani cement sector. Lucky Cement, Fecto Cement, and an unidentified Chinese firm have already expressed their interest in the company.

“As a result of delay and uncertainty resulting from recent legal proceedings initiated in the Sindh High Court, Bestway Cement Limited has decided not to proceed with the acquisition of the north plant of Dewan Cement Limited located at Kamilpur, near Haripur, Khyber Pakhtunkhwa,” said Bestway Cement, in a notification to the Pakistan Stock Exchange.

Nepalese producers ask for preferential treatment The Nepal Clinker and Cement Manufacturers Association (NCCMA) asked for preferential treatment, which includes faster forest and environmental clearance and mining licensing over the next four to five years.

Rising demand for cement by the Nepalese construction sector has not been accompanied by an equivalent growth in clinker production. The country remains dependent on clinker imports from India to close the gap.

“If we prepare a proper strategy to harness resources optimally, we can succeed in becoming self-reliant on cement production within the next 4-5 years,” said Purushottam Lal Shanghai, president of NCCMA.

“Cement industries have witnessed a severe clinker shortage since the last few weeks after the supply from India started falling drastically,” said Tara Pokharel, general secretary of Cement Manufacturers Association of Nepal “Following shortage of such railway tracks in India itself, Indian traders are cutting down the number of railway racks previously used to supply clinkers to Nepal. As a result, Nepali cement industries, which do not have their own clinker production plant and rely on Indian supply, have been largely affected,” added Pokharel.

For manufacturers that are not dependent on Indian clinker the problem is coal. Coal is also supplied from India, and the lack of railway racks is also affecting the commodity.

Nepalese manufacturers are pleading with Indian dealers to increase the number of racks available for coal and clinker transportation, and believe that the situation will be solved soon.

According to the manufacturers, cement demand in the country is currently at eight million tons per annum, while installed capacity is only able to produce 3.46 million tons. New projects are expected to increase national production to 6.5 million tons per year.

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cement PEOPLE

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eople

Orient Cement appoints new director IYR Krishna Roa was appointed Independent Director of Orient Cement for a period of five years.

The appointment became effective on May 5, but is still pending approval by shareholders. Confirmation will therefore come during the next annual meeting.

Rao was the Chief Secretary of Andhra Pradesh, between 2014 and 2016. Before he was the Chief Commissioner of Land Administration, between 2011 and 2013.

Burnpur Cement appoints Saurabh Ganguly as brand ambassador

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

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

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June/July 2017

LafargeHolcim appoints new CEO LafargeHolcim announced the appointment of Jan Jenisch as CEO from 16 October 2017. Jan Jenisch joins from Swiss company Sika AG, which has a leading global position in the development and production of systems and products for the building materials and automotive sectors.

Jan Jenisch (50) has been the CEO of Sika AG since January 2012. Under his leadership, Sika has developed its business in new markets and set new standards of performance in sales and profitability. As a result, the market capitalization of Sika has more than tripled and the company has recently gained admission to the Swiss Market Index.

Beat Hess, Chairman, LafargeHolcim, said, “Jan Jenisch is a CEO that is widely respected for consistently delivering strong business results and he comes with a deep understanding of the building materials sector. His agile leadership style and his personal skills will be a good fit with our company culture and the management team of LafargeHolcim. I look forward to working with him to accelerate the strategy execution of our company.”

Jan Jenisch, CEO designate, said, “I am delighted to have the opportunity to join LafargeHolcim. It is an iconic company

India Cement and Construction Materials Journal

and a global leader in the building materials industry with enormous future potential. I very much look forward to joining the global management team and to leading the company into a very successful future.”

Jan Jenisch joined Sika in 1996 and has worked in various management functions and countries. He was appointed to the Management Board in 2004 as Head of the Industry Division and he served as President Asia Pacific from 2007 to 2012.

Jan Jenisch has studied in Switzerland and the USA, and is a graduate of the University Fribourg, Switzerland, with a MBA (lic. rer. pol.). He is a non-executive Director of the stock-listed Schweiter Technologies AG and of the privately held Glas Troesch AG.

orders & equipment highlights

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rders & equipment

DG Khan Cement orders two mills from Loesche

Gebr. Pfeiffer receives follow-up order from Sagar Cement

The Pakistani manufacturer ordered two new mills, one for raw materials and other for clinker, for a new cement production line in Hub, Baluchistan.

The raw mill will have the capacity to process 1,050 tons per hour, making it the largest raw material mill in the world. Both the clinker and the raw material mills will be equipped with a COPE drive, making it possible to split the total drive capacity.

Additionally, Loesche will also supply a coal mile with the capacity to process 66 tons per hour.

Sagar Cement has entrusted Gebr.

Pfeiffer with another order for a mill to grind granulated blast-furnace slag and granulated blast-furnace slag cements.

A new grinding plant for 160 tons per hour of ground granulated blast-furnace slag is intended for the extension of the company’s Bayyavaram Village works, near Visakhapatnam, India.

Gebr. Pfeiffer will be supplying an MVR 5000 C-4 mill, equipped with a 4300 kWdrive and four grinding rollers with active redundancy. This means that all four grinding rollers are actively taking part in the grinding process. When it comes to scheduled maintenance works, two opposite grinding rollers can be swung out and the mill can continue production with the two remaining rollers.

Even in the case of an unplanned outage of one of the grinding rollers, the mill can continue in operation while the roller

under service is being worked on outside the mill.

The grinding plant will be designed so that granulated blast-furnace slag can be ground to a fineness of 4500 cm2/g (acc. to Blaine), while composite cements, with varying proportions of granulated blastfurnace slag, fly ash and gypsum, can be ground in various finesses.

While the core components of the mill – roller, tension system, grinding bowl and planetary gearbox – will be Pfeiffer-supply 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), Pfeiffer’s Noida-based subsidiary. They will also supply most of the equipment required to complete the grinding plant, including plant fan and hot gas generator. Fired with lump coal, it will supply the heat required for drying the moisture contained in the granulated blast-furnace slag.

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CONSTRUCTION BUILDING MATERIALS BY BMWEEK.COM

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onstruction & building materials by bmweek.com

Prices for ready mix concrete rise in Turkey The price of ready-mixed concrete rose 12 percent in Turkey at the start of May, with prices per cubic meter reaching TRY 160. After the Turkish referendum, prices of important commodities for the construction sector, such as iron, were influenced. Iron prices rose, but were brought down due to discount campaigns after the referendum.

Cement prices also rose 10 to 15 percent during this period. The construction sector is worried about the surge in ready-mix concrete prices, as it constitutes about 10 to 15 percent of total construction costs. Most indicators point to a strong regional price fluctuation, while supplies remain steady. Ready-mixed concrete producers say that the change in bridge prices in Istanbul led to a cost increase that is affecting the sector.

The recent Turkstat construction costs index reached a record level of 255.9 points in May, already taking into account the recent increases in living cost, and includes both labor and other production costs. Year-on-year, the index rose 16 percent, with prices of ready-mix concrete having risen from TRY 100 to RY 150 last summer, due to the higher exchange rate for the USD.

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June/July 2017

Construction activity rises in May Activity in the United Kingdom’s construction sector expanded at its fastest rate in 17 months during May, due to an increase in home building activity.

The Markit/CIPS construction purchasing managers’ index rose from 53.1 points in April to 56 in May, its highest level since December 2015, and above the 50-points mark, which indicates growth. "A sustained rebound in residential building provides an encouraging sign that the recent patch for property values has not deterred new housing supply," said Tim

Moore, senior economist at IHS Markit.

"Instead, strong labor market conditions, resilient demand and ultra-low mortgage rates appear to have helped boost work on residential development projects."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the result suggested the Brexit vote's "dampening influence on construction activity is fading". But he added: "Note, however, that the PMI has had to exceed 53 in the past to signal growth.

"May's PMI reading, therefore, is consistent with quarter-on-quarter growth in construction output of only about 0.5%."

Knauf acquires new plasterboard business in Mexico PPG, a US-based company, has completed the sale of its plasterboard and cement board business to Knauf International.

The business, Plaka, is based in Mexico and supplies plasterboard, cement board and dry wall to the Mexican construction market, primarily.

India Cement and Construction Materials Journal

PPG acquired the Plaka business in 2014 as part of its acquisition of Consorcio Comex, and had approximate sales of USD 30 million in 2015. It operates two manufacturing facilities in Querétaro, Mexico. Neither of the parties disclosed the financial details of the process.

Boral to build new plant in South India Building products technology provider USG Boral will build a new plasterboard plant in South India, an investment calculated at around INR 300 crore.

Insee Aggregates building new aggregate processing plant in Thailand According to a press release from Metso, “Insee Aggregates has selected Metso to supply a full-scope, stateof-the-art quarry processing plant for the Suphanburi Quarry in Thailand.

The delivery covers all the advanced crushing and screening equipment, full electrical plant design, automation software and hardware, as well as related services and sustainable optimization.”

The quarry has a large proven reserve, and after the completion of the plant’s installation, it will be the most modern processing plant in Thailand for the production of high-quality aggregates.

Its estimated production capacity should be of around 2 million tons per year.

The in-the-pit mining and the crushing and screening plant will be located northwest of Bangkok. Production is expected to start in 2018. The total value of the contract was not disclosed, but the order was booked in the last quarter of 2016.

The Suphanburi Quarry is owned and operated by Insee Aggregates, which is a part of Siam City Cement, Thailand’s second-largest cement producer.

"Siam City Cement entered the quarrying business over 10 years ago

with a vision to be Thailand's premium, high-performance aggregate supplier.

The Suphanburi Quarry is a highly strategic operation, providing aggregates to the Bangkok market. While the expansion objective of this project was to double the existing crushing capacity via the construction of a new line, it was of utmost importance that quality and production performance was never compromised. Our target was to build a world-class plant with sustainable processing operations, using the most advanced equipment and processes available. In summary, we wanted a lowcost/high-productivity, environmentally responsible operation," says Mr. Craig Bickley, CEO of Siam City Concrete (SCCO).

"Metso's approach to this design and construct project was to invest considerable time, effort and resources to ensure they had fully understood and captured our requirements and needs, and then to advance our thinking in new and innovative ways. We were impressed with Metso's industry-leading, energysaving solutions and sustainable optimization services" he continues.

The order includes the crushing and screening plant, covering five crushers, five vibrating screens, the plant and overland conveyors, steel structures and chute works, ancillary equipment, electrical and automation, as well as the related services, such as installation, start-up, commissioning and technical direction.

The company already owns two facilities in the country, and the construction of the new plant should begin in a few months. The previous two plants were built at a cost of around INR 100 crore.

"We are bullish about India. We have had a very good experience here. We are in talks with some state governments in the South for setting up a 30 million square meters plasterboard capacity, which is likely to be finalized in a fortnight," said Koushik Sarkar, USG Boral Building Products India’s CEO and Managing Director.

"Plans are under way to break ground in the September quarter of 2017. The plant is expected to be fully operational in 24 months. More than 100 people are expected to be employed at full capacity," he said. The new facility will provide a plasterboard capacity of 30 million square meters, in a standalone facility located in South India, added Sarkar. He said the new facility will add to USG Boral’s presence in India, where it currently operates two other facilities, a 9-million-square-meter plasterboard and metal plant near New Delhi (Khushkhera), and a joint compound and putty plant in the Chennai area.

USG Boral’s CEO, Frederic de Rougemont, said "This facility offers us the ability to significantly increase our operations in India and provide our customers in the region with the best plasterboard products." "Our India business has experienced strong growth and this investment strongly positions the company to continue supplying our customers in the South, as demand for high quality, high strength plasterboard products grows in the medium and longer-term," Rougemont added.

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PETCOKE PRODUCTION, SHIPPING AND PRICING BY PETCOKEWEEK.COM

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etcoke production, shipping and pricing by petcokeweek.com

Goa Carbon’s Bilaspur plant resumes production Goa Carbon resumed operations at its Bilaspur plant, in the Indian state of Chhattisgarh on May 25, after shutting it down briefly for routine maintenance.

“With reference to the earlier announcement… about temporary shut down for maintenance work at company’s Bilaspur plant located at 3440, Sector B, Sirgitti Industrial Area, Bilaspur (Chhattisgarh), we wish to inform that operations at the said unit have resumed yesterday, May 25,” the company said in a filing to the BSE. According to the company, there should not be any financial impact derived from this shutdown, as there is a sufficient inventory to service the orders in hand.

Goa Carbon, producer and marketer of calcined petcoke, is a regular supplier to aluminum smelters, graphite electrode and titanium dioxide manufacturers, as well as other users in the metallurgical and chemical industries.

Phillips 66 reports strong QoQ growth Phillips 66 reported first quarter earnings of USD 535 million, compared to USD 163 million in the fourth quarter of 2016.

These earnings include the net benefit of gain on consolidation of a petroleum coking venture, and an impairment taken by an equity affiliate. Excluding these, adjusted earnings for the January-March period in 2017 were USD 294 million, rising USD 211 million from the previous quarter. “We have successfully completed several major turnarounds in Refining and Chemicals,” said Greg Garland, chairman and CEO of Phillips 66.

“First-quarter earnings reflect this downtime and also highlight the benefit

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India Cement and Construction Materials Journal

of a diversified portfolio. Our Chemicals business had solid results on good demand and improved margins. The Freeport LPG Export Terminal is fully operational, and we have several Midstream and Chemicals projects nearing completion. Our safety performance did not meet expectations this quarter. We remain dedicated to operating excellence, executing our Midstream and Chemicals growth strategy, enhancing returns in Refining, and returning cash to shareholders."

First quarter earnings for the company’s refining business reached USD 259 million, compared with a loss of USD 38 million in the previous quarter. These earnings include a USD 261 million gain from the consolidation of the MSLP petroleum coking venture, following the resolution of an ownership dispute.

Petroleum products consumption grows in India Petroleum self-sufficiency in India fell to its lowest annual level since 2011 in FY2016-17, reaching 17.9 percent.

Petcoke imports surging in India In an aim to cut down on coal imports, India’s Ministry of Coal may have gotten what it wanted – but that also led to a rise in the country’s petroleum import bill. Responding to an INR 400 per ton cess on coal, end users shifted their fuel needs to the cheaper petcoke, the imports of which rose 39.8 percent in the last financial year. This has made petcoke the largest contributor to the total petroleum products that the country imported in this period.

"Import of Petroleum, Oil and Lubricants (POL) products increased by 17.0 percent during March 2017 as compared to March 2016, mainly due to increase in import of LPG," according to PPAC (Planning and Analysis Cell).

"Import of POL products increased by 21.7 percent during April 2016 to March 2017 as compared to the same period of the previous year (2015-16), with imports of liquefied petroleum gas (LPG) and petcoke accounting for 95.0 per cent of total increase of 6.4 million metric tons (MMT)," added PPAC. The rise in petcoke imports is mostly attributed to cement companies, which have opted to use petcoke due to its higher calorific content, as well as its lower price point when compared to coal. "Some of

the end consumers who use coal due to cost economics are moving towards usage of petcoke. These decisions are being taken based on the landed cost involved for coal against petcoke and because petcoke has a high calorific value," said Rahul Prithiani, director, CRISIL Research. However, petcoke prices have been rising alongside coal’s, which has increasingly turned it into less of an appealing alternative.

Consumers have always kept their procurement flexible, based on the prices movement. "It is difficult to estimate. If prices remain lower, the trend is unlikely to change," said an oil and gas analyst who did not wish to be identified.

The petcoke imports volume is still small when compared to coal, since for the April-December 2016 period, total coal imports stood at 144.9 million tons, while petcoke imports for the total financial year of 2016-17 only reached 14 million tons. Internal production of petcoke dropped 3 percent in the last financial year, which some relate to Reliance Industries’ petcoke gasification production.

Prices for petcoke are currently high, at around USD 95-96 per ton, while thermal coal is trading at around USD 73.90 per ton. Dry bulk freight rates are also impacting prices, and should considerably affect Indian buyers’ decision-making.

The self-sufficiency is calculated by using the total production from Indigenous Crude and Condensate, and the total petroleum consumption in the country. In April 2017, this percentage fell to 16.6 percent, lower from the 17.9 percent displayed in April 2016. A significant contributor to this drop in self-sufficiency is India’s fast-growing demand for petroleum products, which the domestic production is unable to match. According to data from the Petroleum Planning and Analysis Cell (PPAC), India’s total consumption in the last financial year stood at 194.2 million tons, against a total production of 34.8 million tons from Indigenous Crude and Condensate.

Consumption has been on the rise since 2011, from 148 million tons in 2011-12, when self-sufficiency was pegged at 24.1 percent, to 194.2 million tons in the previous fiscal. Domestic production, however, has dropped from 35.6 million tons in 2011-12 to 34.8 million tons in 2016-17. For April 2017, a PPAC report stated, “Total crude oil processed during April 2017 was 20 million tons, a marginal decrease of 0.8 percent over April 2016. There was a decrease of 4.5 percent in indigenous crude oil processed over April 2016.

On the other hand, consumption of petroleum products continues to show a healthy growth rate of 3.3 percent in April 2017, with growth seen in LPG, Naphtha, petrol, diesel, aviation turbine fuel, petcoke and other products' consumption. To be sure, April’s consumption growth rate at 3.3 per cent is lower compared to 10.3 per cent witnessed in the year-ago period.

However, the lower growth rates could also be attributed to a high base effect.”

India Cement and Construction Materials Journal

June/July 2017

45

analyst recommendations India Cements Investment analysts advise that India Cements will outperform the market as of June 9. This has been the consensus forecast since the sentiment of investment analysts improved on Jan 31, 2017.

The previous consensus forecast advised investors to hold their position in India Cements.

Ambuja Cement As of Jun 9, 2017, the consensus forecast amongst 39 investment analysts advises investors to hold their position in Ambuja Cements.

This has been the consensus forecast

UltraTech Cement As of Jun 12, 2017, the consensus forecast amongst 44 polled investment analysts covering UltraTech Cement advises investors to hold their position in the company, according to the Financial

since the sentiment of investment analysts deteriorated on Apr 13, 2016.

The previous consensus forecast advised that Ambuja Cements Ltd would outperform the market, according to the Financial Times.

Times. This consensus forecast since the sentiment of investment analysts deteriorated on May 3, 2017.

The previous consensus forecast advised that UltraTech Cement would outperform the market.

Ramco Cements The consensus forecast amongst 24 polled investment analysts covering Ramco Cements advises that the company will outperform the market, ss of Jun 9.

This has been the consensus forecast since the sentiment of investment analysts improved on Nov 6, 2012. The previous consensus forecast advised investors to hold their position in Ramco Cements, according to the Financial Times.

46

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BUZZ

New cement plant in Ethiopia

3.

Siam City cement buys another cement company in Vietnam

4.

LafargeHolcim launches new plant in Cameroon

5.

HeidelbergCement builds new clinker unit in Germany

6.

CRH CEO defends performance of the company

7.

CEO of LafargeHolcim resigns

8.

The Ramco cements increased its takes at lynks logistics

9.

Votorantim to focus on debt management

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sold

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Mexico Tula Plant to improve fuel yield

4.

Coking output continues to decline in Brazil

5.

Petroleum products consumption grows in India

6.

Petcoke imports surging in India

7.

US Saudi Aramco UPS its stake on Texas refinery

8.

India Kochi refinery commissioning coking equipment

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INDIA

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India: Adani Cementation to build new grinding facilities

3.

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Knauf acquires new plasterboard business in Mexico

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North India: Cement prices increase twice in March

paid

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UK construction activity rises in May

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Insee aggregates building new aggregate processing plant in Thailand

4.

Atlas Copco opens new equipment unit in the US

5.

Prices for ready mixed concrete rise in Turkey

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India fly ash brick tax hike condemned

7.

Boral to build new plant in South India

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Vicat launches new concrete product

9.

Wienerberger launching new type of bricks

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global portland

exports

growth

5.

Cement demand remains sluggish in India

6.

ACC considers merger with Ambuja Cement

7.

Indian ACC to build new plant in Telangana

8.

Gebr. Pfeiffer to supply new mill to Sagar Cement, India

9.

ACC cement improves net profit in 2016

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IRAN

2.

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