iso-8859-1 eco cement
TRANSCRIPT
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Cement IndustryCement Industry
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World Cement ProductionWorld Cement Production
World cement production is about 2.27 billionWorld cement production is about 2.27 billionmetric t onesmetric t ones
(Source:(Source: www.researchinchina.comwww.researchinchina.com))
China (40%+ of world production)China (40%+ of world production)
IndiaIndia
USAUSA
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Evolution of Cement Industry:
Pre and post liberalization Originated in India in 1914 in Probandar, Gujarat.
The industry was partially decontrolled in 1982. So, gave
impetus t o its pace of growth.
Installed capacity more than doubled during the period
1980-90.
Has been growing rapidly at an average rate of 8 per cent
except for a short period in 1991-92
Current Situation of the Industry and Rate of growth
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Global Bigwigs in Cement Global Bigwigs in Cement
La Farge, FranceLa Farge, France
Holcim, SwitzerlandHolcim, Switzerland
Cemex, MexicoCemex, Mexico
Italcementi, ItalyItalcementi, Italy
Heidelberg Cement, GermanyHeidelberg Cement, Germany
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Distribution of World Cement
Producti
on
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A Primer on the Indian Cement A Primer on the Indian Cement
IndustryIndustry Highly f ragmented (low entry barriers)Highly f ragmented (low entry barriers)
Cyclical industryCyclical industry
Highly capital & energy intensiveHighly capital & energy intensive
Heavily taxed sect orHeavily taxed sect or
High bulk (vo
lume) lowvalue pr
oduct High bulk (
volume) l
owvalue pr
oduct
Heavy dependence on 3 sect ors viz. coal,Heavy dependence on 3 sect ors viz. coal,power and transport power and transport
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Current SituationCurrent Situation
Growth Rate of 11.16%Growth Rate of 11.16%
Industry CapacityIndustry Capacity -- 157 million t
ons157 milli
on t
ons
Per capita Consumption of Cement in IndiaPer capita Consumption of Cement in India--
110 kg against Wo
rld Av
erage110 kg against Wo
rld Av
erage -- 250 kg250 kg
Cement Industry is segmented in regionsCement Industry is segmented in regions--North, West, East, South, etc.North, West, East, South, etc.
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SWOT ANALYSISSWOT ANALYSIS
StrengthsStrengths
Increase in demandIncrease in demand
Capacity utilization overCapacity utilization over90%90%
WeaknessesWeaknesses
Cement Industry isCement Industry ishighly f ragmentedhighly f ragmented
Industry is also highlyIndustry is also highlyregionalizedregionalized
OpportunitiesOpportunities
DemandDemand supply gap bcozsupply gap bcozLower per capitaLower per capita
consumption as compared t o consumption as compared t o developing countries (=1/3developing countries (=1/3
rd of world average)rd of world average)
ThreatsThreats
Government Government intervention t o adjust intervention t o adjust
cement pricescement prices Transportation cost isTransportation cost is
scaling high; bottleneckscaling high; bottleneckdue t o loadingdue t o loading
restrictionsrestrictions
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Ordinary Portland cement (OPC)
White Cement
Portland Blast Furnace Slag Cement (PBFSC)
Specialized Cement
Water Proof Cement
Segments and Grades of
Cement
Segments and Grades of
Cement
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Major Players of Cement IndustryMajor Players of Cement Industry
in Indiain IndiaThe Associated Cement CompaniesLimited (ACC)
UltraTech CemCo Ltd.
Gujarat Ambuja Cements Limited
Grasim Industries Limited
Century Textiles and Industries Limited
Birla Corp Limited
The India Cements Limited
Jaiprakash Industries Limited
Laf ar e
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Indian Cement IndustryIndian Cement Industry MajorMajor
Players in 2006Players in 2006
12.6
9.7
10.6
10.34.73.65.94.5
3.2
34.8
ACC
Ultratech
Gujarat Ambuja
Grasim Industries
Century Textiles and
Industries
Birla Corp Ltd
India Cements
Jaiprakash Industries
(Jaypee)
Lafarge
Others
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Mergers & AcquisitionsMergers & AcquisitionsFlurry of consolidation in the last 3 years. Notable onesFlurry of consolidation in the last 3 years. Notable ones
include:include:
Gujarat Ambuja picking up 14% in ACCGujarat Ambuja picking up 14% in ACC
Grasim acquiring cement business of Grasim acquiring cement business of
L&T forming UltraTechL&T forming UltraTech ABG has 17 plants, 8 ABG has 17 plants, 8--Grasim and 9Grasim and 9--UltratechUltratech
Holcim taking minority stake in GACL and 67% stake inHolcim taking minority stake in GACL and 67% stake in ACC ACC
Heidelberg Cement acquiring 50% in Indorama Cement Heidelberg Cement acquiring 50% in Ind
orama Cement
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Contribution t o EconomyContribution t o Economy
The cement industry accounts forThe cement industry accounts forapproximately 1.3% of GDP and employsapproximately 1.3% of GDP and employsover 0.14 million peopleover 0.14 million people
It is a signif icant contribut or t o theIt is a signif icant contribut or t o therevenue collected by both the central andrevenue collected by both the central andstate governments through excise andstate governments through excise andsales taxessales taxes
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Declining Role of Public Sect orDeclining Role of Public Sect or
One of the most important areas of One of the most important areas of operations for the Indian private sect oroperations for the Indian private sect or
Among cement public sect or undertakings Among cement public sect or undertakings(PSUs), Cement Corporation of India (CCI),(PSUs), Cement Corporation of India (CCI),a central PSU, is the leading playera central PSU, is the leading player
Private sect or (large companies) accountsPrivate sect or (large companies) accountsfor around 95% of the t otal installedfor around 95% of the t otal installedcapacitycapacity
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Demand and SupplyDemand and Supply
Surplus has declined f rom 0.42 mt in 2005Surplus has declined f rom 0.42 mt in 2005t o 0.23 mt in 2006t o 0.23 mt in 2006
Capacity utilizationCapacity utilization 84% in 2005 t o 90%84% in 2005 t o 90%in 2006in 2006
India per capita Cement Production 0.13India per capita Cement Production 0.13t ones in 2006 whereas globally 0.3 t onest ones in 2006 whereas globally 0.3 t ones
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Government RegulationsGovernment Regulations
Price and Distribution Controls (1940-1981)
Partial Decontrol (1982-1988)
Total Decontrol (1989)
Fact ors (under Govt.) Inf luencing Prices of the Cement:Coal
ElectricityInf rastructureLime st oneTransport
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Cement ExportsCement Exports
6 MT exports in 20066 MT exports in 2006
CCement exports were higher by 47.7%ement exports were higher by 47.7%
ExpectedExpected CAGR of 10CAGR of 10--12 per cent over12 per cent overthe next 4the next 4--5 years5 years
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FDI/FII
100% FDI permitted
Foreign players entry by Mergers and Acquisitions
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Cost structureCost structure
The 2 major costs in cement industry areThe 2 major costs in cement industry are
(i) Energy costs(i) Energy costs
(ii) Freight costs(ii) Freight c
osts Over the years, the share of energy costsOver the years, the share of energy costs
have gone up marginally while that of have gone up marginally while that of f reight costs has declinedf reight costs has declined
Other costs more or less stableOther costs more or less stable
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Energy Management & TechnologyEnergy Management & Technology
Upgradatio
nUpgradatio
n The energy consumption by the cement industry is
almost 5% of the t otal global industrial energyconsumption
Energy conservation measures are cost eff ective andbacked by the energy eff iciency bill passed by theparliament recently
Using PI sof
twareof
OSIsof
t all the 17 Plantsof
AdityaBirla Group (investment of Rs. 5 crore) all over India areintegrated f rom Shop Level t o Top Level
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Use of Alternate Fuels & GRP RatingUse of Alternate Fuels & GRP Rating
Energy costs account for nearly 30Energy costs account for nearly 30--40% of the t otal40% of the t otalcosts of cement production.costs of cement production.
Thus, the use of wastes as alternative f uels (likeThus, the use of wastes as alternative f uels (like tiretirederived fuels (TDF)derived fuels (TDF) )in cement plants is technically,)in cement plants is technically,ecologically and economically justif ied.ecologically and economically justif ied.
Green Rating Pro ject (GRP) whichGreen Rating Pro ject (GRP) which looks at thelooks at theenvironmental health of the sect or,environmental health of the sect or, has now rated thehas now rated thecement sect or.cement sect or.
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Impact of Budget (2007Impact of Budget (2007--2008)2008)
Exercise duty based on Price
Increased allocation for Inf rastructure pro jects
Railway budget: decrease in the f reight rates forDiesel, Limest one, Petrol
Removal of tax exemptions for thecontract ors
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Path Ahead!Path Ahead! GDP growth expected t o f uel the boomGDP growth expected t o f uel the boom
Increased spending on roads and housing expectedIncreased spending on roads and housing expected
Bharat Nirman and concomitant rural development also Bharat Nirman and concomitant rural development also
can push up the f igurescan push up the f igures
On the whole inf rastructure spending expected t o driveOn the whole inf rastructure spending expected t o drive
growth in cement and construction activitiesgrowth in cement and construction activities
Growth at 9% per annum f rom 2007Growth at 9% per annum f rom 2007--20102010
Production expected t o increase t o 196 mt by 2010Production expected t o increase t o 196 mt by 2010
Consumption expected t o increase t o 190 mt by 2010Consumption expected t o increase t o 190 mt by 2010
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Global outlook for cement &Global outlook for cement &
constructi
on industryc
onstructi
on industry
Annual cement demand t o grow 4.7% Annual cement demand t o grow 4.7%
Construction boom in China (Olympics) &Construction boom in China (Olympics) &India (housing, inf rastructure) t o driveIndia (housing, inf rastructure) t o drivepro jects till 2010pro jects till 2010
Half the worlds concrete production and aHalf the worlds concrete production and athird of the steel production goes int o third of the steel production goes int o China for her construction pro jectsChina for her construction pro jects
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Ref erences:Ref erences:
Prowess DatabaseProwess Database
www.edelcap.comwww.edelcap.com
www.pinsentmasons.comwww.pinsentmasons.com www.icra.inwww.icra.in
www.hinduonnet.comwww.hinduonnet.com
Survey of Indian industry, 2006 publishedSurvey of Indian industry, 2006 publishedby The Hinduby The Hindu
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BARRIERSBARRIERS TOTO ENTRY ENTRY Cement Cement beingbeing aa highhigh bulkbulk andand lowlow valuevalue commodity,commodity, outwardoutward f reight f reight accountsaccounts forfor closeclose t ot o oneone f if thf if th of of thethe t otalt otalmanuf acturingmanuf acturing cost cost.. InIn addition,addition, forfor everyevery t onnet onne of of cement cement produced,produced, closeclose t ot o 11..77 t onnest onnes of of rawraw materialmaterial(including(including coal)coal) isis transportedtransported.. InIn thisthis scenario,scenario, thethe locationlocation of of thethe cement cement plant plant becomesbecomes crucialcrucial.. WhileWhile decidingdecidingonon thethe plant plant location,location, therethere isis aa tradetrade--off off betweenbetween proximityproximity t ot o rawraw materialmaterial sourcessources andand proximityproximity t ot o marketsmarkets.. A A split split--locationlocation cement cement plant plant cancan bebe aa goodgood compromisecompromise betweenbetween thethe twotwo optionsoptions.. TheThe plant plant alsoalso hashas t ot o addressaddressissuesissues of of logisticslogistics (evacuation(evacuation of of cement cement byby rail,rail, roadroad oror waterways),waterways), powerpower availabilityavailability inin thethe region,region, andandTheThe f irst f irst strategystrategy isis t ot o locatelocate manuf acturingmanuf acturing f acilitiesf acilities nearnear thethe consumingconsuming centrescentres.. InIn thisthis case,case, outwardoutward f reight f reight isis minimisedminimised andand marketingmarketing f lexibilityf lexibi lity enhancedenhanced at at thethe cost cost of of higherhigher rawraw materialmater ial assemblyassembly costscosts.. TheThe secondsecondstrategystrategy isis t ot o locatelocate thethe plant plant closeclose t ot o thethe mineralmineral deposits,deposits, soso asas t ot o minimiseminimise rawraw materialmaterial assemblyassembly costscosts.. GivenGiventhat that 11..44--11..55 t onnest onnes of of limest onelimest one areare requiredrequired perper t onnet onne of of clinker,clinker, locatinglocating thethe plant plant alongalong thethe limest onelimest one depositsdeposits
isis thethe logicallogical corollarycorollary.. Occasionally,Occasionally, asas inin areasareas likelike SatnaSatna,, RewaRewa,, andand Raipur,Raipur, thethe coalcoal pitheadspitheads areare alsoalso quitequitecloseclose byby..availabilityavailability of of materialsmaterials (limest one,(limest one, coal,coal, slag,slag, etc)etc)..TheThe bulkbulk of of thethe cement cement manuf acturedmanuf actured isis consumedconsumed nearnear urbanurban centrescentres.. InIn thethe manuf acturemanuf acture of of cement,cement, forfor everyevery11 t onnet onne of of clinker,clinker, about about 11..66--11..77 t onnest onnes of of limest onelimest one andand coalcoal needneed t ot o bebe assembledassembled.. ForFor OPC,OPC, anotheranother 5050 kgkgof of gypsumgypsum isis requiredrequired whilewhile grindinggrinding thethe clinkerclinker downdown.. ForFor PPC,PPC, upup t ot o anotheranother 250250 kgkg of of pozzolonicpozzolonic materialmaterialsuchsuch asas f lyf ly ashash requiresrequires t ot o bebe assembledassembled.. Thus,Thus, therethere cancan bebe twotwo broadbroad locationallocational strategies,strategies, stemmingstemming f romf romthethe principalprincipal objective,objective, whichwhich isis not not merelymerely t ot o minimiseminimise unit unit--manuf acturingmanuf acturing cost,cost, but but t ot o minimiseminimise unit unit delivereddeliveredcost cost asas wellwell.. As As cement cement isis aa lowlow value,value, highhigh bulkbulk commodity,commodity, f reight f reight cost cost becomesbecomes aa signif icant signif icant f act orf act or inin deterdeter miningmining thethelandedlanded cost cost of of cement cement.. ThisThis hashas resultedresulted inin aa veryvery lowlow volumevolume of of interinter nationalnational tradetrade inin cement cement.. WorldWorld cement cement tradetrade hashas averagedaveraged just just aroundaround 66--77%% of of thethe t otalt otalproductionproduction.. Although, Although, worldworld tradetrade inin cement cement isis limitedl imited becausebecause of of highhigh f reight f reight costs,costs, therethere areare countries,countr ies, whichwhich eithereither import import aa signif icant signif icant shareshare of of theirtheir t otalt otal consumptionconsumption oror export export aa majormajor shareshare of of theirtheir t otalt otal productionproduction.. Countries,Countries, whichwhichimporimpor t t aa signif icant signif icant shareshare of of theirtheir consumption,consumption, appearappear t ot o bebe f allingf alling inin thethe developingdeveloping worldworld category,category, wherewhere
thethe publicpublic expenditureexpenditure onon inf rastructureinf rastructure pro jectspro jects isis veryvery highhigh.. TheThe MiddleMiddle East East countriescountries (although(although not not f allingf allinginin thethe developingdeveloping worldworld category)category) havehave hugehuge requirementsrequirements of of cement cement becausebecause of of constructionconstruction workwork inin pro jectspro jectsinin thethe oiloil sect orsect or.. Also Also inin thesethese countries,countries, unf avourableunf avourable conditionsconditions (for(for example,example, inadequateinadequate cement cement limest onelimest onereserves)reserves) havehave discourageddiscouraged cement cement capacitycapacity creationcreation.. Countries,Countries, whichwhich export export aa largelarge shareshare of of theirtheir domesticdomestic production,production, appearappear t ot o bebe havinghaving oneone thingthing inin commoncommon..CountriesCountries withwith highhigh export export thrust thrust opt opt forfor bulkbulk transportationtransportation forfor exportingexporting cement cement.. ForFor example,example, byby optingopting forfor bulkbulktransportation,transportation, GreeceGreece isis inin aa positionposition t ot o export export overover 5050%% of of itsits cement cement productionproduction.. BulkBulk transportationtransportation leadsleadst ot o signif icant signif icant advantagesadvantages suchsuch asas savingssavings inin f reight f reight costscosts andand packingpacking costs,costs, avoidanceavoidance of of transit transit loss,loss,adulteration,adulteration, pilf erage,pilf erage, burstingbursting of of bagsbags andand damagedamage t ot o cement cement.. At At thethe exex--f act orf act or yy level,level, IndianIndian cement cement isis quitequite competitivecompetitive withwith manymany globalglobal cement cement producingproducing regionsregions.. However,However,aa plethoraplethora of of dutiesduties alongalong withwith inf rastructureinf rastructure bottleneckbottleneck reducesreduces thisthis competitivenesscompetitiveness.. As As cement cement isis primarilyprimarily aaregionalregional commodity,commodity, internationalinternational competitivenesscompetitiveness isis not not reallyreally aa seriousserious issueissueOutwardOutward freightfreight onon cementcement isis anan importantimportant elementelement inin thethe operatingoperating costcost ofof aa cementcement plantplant.. ItIt accountsaccounts forfor aroundaroundoneone thirdthird of of thethe t otalt otal variablevariable costscosts.. Most Most of of thethe cement cement plantsplants inin IndiaIndia areare locatedlocated inin andand aroundaround thethe limest onelimest oneclustersclusters.. TheseThese clustersclusters areare distant distant f romf rom thethe collieriescollieries andand thethe marketsmarkets forfor cement cement.. Cement Cement hashas anan averageaverage leadleadof of aroundaround 535535 kmkm.. Thus,Thus, cement cement companiescompanies havehave t ot o relyrely onon extensiveextensive transportationtransportation forfor movingmoving coalcoal f romf rom thethecoalcoal pitheadspitheads t ot o thethe cement cement plantsplants andand forfor despatchingdespatching cement cement f romf rom thethe plant plant t ot o thethe marketsmarkets.. As As bothboth coalcoal andandcement cement areare of of lowlow valuevalue andand bulkybulky inin nature,nature, f reight f reight costscosts areare considerablyconsiderably highhigh forfor cement cement plantsplants.. Cement Cement companiescompanies useuse bothboth roadroad andand railrail transport transport t ot o transport transport cement cement andand t ot o receivereceive coalcoal.. RailRail despatchesdespatchesamount amount forfor about about 3333%% whilewhile roadsroads carrycarry thethe balancebalance 6666%%.. TheThe balancebalance 11%% isis accountedaccounted byby SeaSea transporationtransporation..TheThe shareshare of of roadroad overover railrail hashas onlyonly gonegone upup overover thethe yearsyears.. ForFor coalcoal transportation,transportation, thethe dependencedependence onon railrailnetworknetwork isis stillstill veryvery highhigh andand accountsaccounts forfor aroundaround 7070%% of of coalcoal movement movement Although Although railrail transportationtransportation isis moremore economicaleconomical forfor distancesdistances beyondbeyond 250250--300300 km,km, cement cement companiescompanies havehave startedstarted pref erringpref erring roadroad transportationtransportation eveneven forfor longerlonger distancesdistances becausebecause of of severalseveral reasonsreasons.. RisingRising railwayrailway traff ictraff iccoupledcoupled withwith insuff icient insuff icient investmentsinvestments byby thethe railwaysrailways forfor increasedincreased wagonwagon suppliessupplies andand thethe f act f act that that thethe cement cement industryindustry isis not not anan important important cust omercust omer of of thethe RailwaysRailways (cement (cement cargocargo accountsaccounts forfor just just 77--88%% of of thethe t otalt otal railwayrailwayf reight)f reight) havehave resultedresulted inin aa shortageshortage of of wagonwagon supplysupply t ot o thethe cement cement indust ryindustry.. TheThe railwaysrailways hadhad launchedlaunched thethe "Own"Own Y our Y our Wagon"Wagon" schemescheme--aa schemescheme wherewhere companiescompanies couldcould buybuy wagonswagons andand leaselease it it t ot o thethe RailwaysRailways andand thetheRailwaysRailways wouldwould inin turnturn operateoperate thesethese wagonswagons andand ensureensure theirtheir availabilityavailability t ot o thethe ownerowner.. But But thethe unf avourableunf avourable
terter msms andand conditi
onsc
onditi
ons
of of thisthis schemescheme pre
v
entedprev
ented itsits successf ulsuccess
f ul c
ommercialisati
onc
ommercialisati
on.. TheThe TheThe RailwaysRailways ha
v
ehav
e also
also
increasedincreased theirtheir tariff tariff onon aa regularregular basisbasis (of ten(of ten higherhigher thanthan thethe increasesincreases inin thethe roadroad sect or),sect or), makingmaking themthemuneconomicaluneconomical visvis--àà--visvis roadroad tariff stariff s eveneven forfor longerlonger distancesdistances..