Displaying items by tag: India
Cement Corporation of India signs MoU with NHPC Limited
12 March 2020India: Cement Corporation of India has signed a memorandum of understanding with power supplier NHPC Limited in order to ‘address the cement requirement’ for the Dibang Multipurpose Project in Lower Dibang Valley district, Arunachal Pradesh. The project is aimed at the construction of a 2880MW hydroelectric power plant and gravity dam for flood control in the Dibang Valley.
Breaking the cycle of cement overcapacity?
11 March 2020Announcements from two very different countries serve to highlight the global cement sector’s on-going and seemingly intractable overcapacity issues this week.
First up, India, the world’s largest democracy and second-largest cement market, will reportedly struggle to exceed 70% capacity utilisation in the forthcoming 2020-2021 fiscal year, according to the credit ratings agencies ICRA, India Ratings and Crisil. In the same week, however, we have heard that UltraTech Cement will launch a 3.5Mt/yr capacity expansion at its Bhogasamudam plant in Andhra Pradesh, while ACC committed to launching a 2.5Mt/yr plant in Chandrapur, Maharashtra early last week. In February 2020 Deccan Cements firmed up plans to expand its Mahankaligudem plant in Telengana and JSW wants to turn its Bilakalagudur plant into a 6Mt/yr beast. Back in January 2020. Shree Cement launched ambitious plans to spend US$1.3bn on upgrades in the period to 2023. With Indian capacity estimated to hit 500Mt/yr by the close of 2020, what do all of these producers know that ICRA et al don’t?
Second on the list is centrally-planned Vietnam, the world’s third-largest producer, having produced 96.5Mt of cement in 2019. Here, long-standing excessive capacity is looking increasingly ridiculous following a massive collapse in export sales in January and February 2020 due to the coronavirus outbreak. This, of course, continues to affect cement producers and users alike.
Just today, Nguyen Quang Cung, chairman of the Vietnam Cement Association (VNCA) said that demand is expected to remain high throughout 2020 as a whole. The Ministry of Construction (MoC) currently stands by its autumn 2019 forecast that Vietnam will produce a whopping 103Mt of cement this year. It expects domestic consumption to be around 70Mt, with exports of 33Mt. A 2.5Mt/yr plant in Tân Thắng Commune in the central province of Nghệ, and a 4.6Mt/yr plant in Bỉm Sơn Commune, Thanh Hóa, will come online in 2020, further adding to the country’s capacity. Exports were touted as the saviour of the sector back in January 2020. This assertion may now have to be revisited.
The drivers behind the overcapacity are different in each country. Indian producers have a long history of capacity addition in order to maintain or improve their market share. Standing still is tantamount to walking (or even running) backwards, so the biggest producers (and those that want to become big producers) tend to go ‘over the top’ with their expansion aims. Market forces eventually catch up with the smaller players, which find themselves bought up or shut down. This has the seemingly inevitable effect of maintaining low capacity utilisation rates.
In Vietnam, the overcapacity is due to central targets, which, as noted previously, are an entirely alien concept for cement producers across much of the rest of the world. As Vietnam’s obsession with high cement production has developed, it has become hooked on exports, entering a void recently vacated by Chinese exports. It often sells at scarcely-believable prices and now, with the introduction of the coronavirus into the mix, even these seem to be too high. After all, Vietnam’s cement association cannot ‘set targets’ for cement demand in other countries.
So… how to reduce capacity? There are two examples, again from different types of market. China has, of course, reduced its overcapacity massively to eliminate outdated capacity and improve the country’s environmental performance. This has been possible due to orders from the top of government. The other example can be found in Europe, where the EU Emissions Trading Scheme has finally found its teeth, with the oldest and least efficient plants now feeling the financial bite of their CO2 emissions.
It remains to be seen whether the collapse of the export market will force the Vietnamese cement sector to rationalise its inventory. From a market-based mindset it is clear that it should follow China’s lead. India, meanwhile, has a massive overcapacity that market forces seem slow (or indeed unable) to clear. The EU route may be more applicable here, but one might expect resistance from cement producers. Also, the development and demographic differences between India and Europe are stark, indicating that there may be a need, at some point in the future, for 500Mt/yr of capacity. The Indian majors are counting on this and laying the groundwork for a step-change in the future. Indeed, in a few years, 500Mt/yr may look vanishingly small if demand increases rapidly. What are the chances of that?
UltraTech announces Andhra Pradesh plant expansion plans
09 March 2020India: Aditya Birla subsidiary UltraTech has announced plans for a 3.5Mt/yr clinker production capacity expansion to its integrated Andhra Pradesh plant in Bhogasamudram, Anantapur district, to 10Mt/yr from 6.5Mt/yr. The new kiln line will cost US$169m and reach completion in March 2022.
Pakistan: Pakistan has recorded year-on-year production growth of 34%, to 4.49Mt in February 2020 from 3.35Mt in February 2019. Consumption grew by 31% to 3.74Mt from 2.84Mt in February 2019. Exports throughout the month were 753,000t, up by 48% from 508,000t. Export growth was bolstered by a weak Pakistani rupee and was stronger in southern Pakistan than in northern Pakistan, with the latter feeling the effects of lowered Afghan demand and zero exports to India.
India: Production capacity utilisation in the cement industry is expected to remain below 70% in the 2020 – 2021 financial year due to new plant projects in the next two years. Credit ratings agencies ICRA, India Ratings and Crisil all forecast relatively low demand for cement compared to a decade-high of 13% in the 2019 – 2020 period, according to the Press Trust of India. Cement production rose by 0.7% year-on-year in the first nine months of 2019 – 2020 period. However, production growth has hastened since then. The ratings agencies offer different outlooks on anticipated profits look forward.
Worker dies at Bhavya Cement plant in Andhra Pradesh
04 March 2020India: A worker has been killed after becoming trapped in a crusher at the Bhavya Cement plant in Andhra Pradesh. The incident took place when the 28-year old worker was cleaning the belt of the crusher, according to the New Indian Express newspaper. The local authorities have inspected the plant
India: ACC Limited has announced that it will open a 2.5Mt/yr integrated cement plant with ‘state-of-the-art pollution control technology,’ along with a 25MW coal-fired power plant that will serve the plant in addition to an existing 15MW coal-fired power plant on the site in Chandrapur, Maharashtra. The opening in March 2020 will follow the expiry of a period of respite for continued operation of ACC’s 0.9Mt/yr integrated Cement Nagar plant on the same site.
The Times of India has reported that the plant, the company’s oldest, first shut on 30 November 2010 due to repeat violation of pollution standards, and was permitted to reopen in January 2011 up until 28 February 2020, subject to its adherence to strict conditions imposed by the Maharashtra Pollution Control Board (PCB). The company says that it is investigating the use of cladding in the old power plant to bring noise pollution down to 55dB.
Toshali Cements acquires land with historic religious landmark
28 February 2020India: The state government of Odisha has leased an area of limestone-bearing land that includes the Asura Vihara Gumphas, a first century BC Jain religious centre with significance in local mythology. The Blink newspaper reported that the site, consisting of three caves, is ‘covered by thick vegetation’ and in need of ‘proper conservation and preservation.’ Indian National Trust for Art and Cultural Heritage (INTACH) Odisha state curator Anil Tripathy said, ‘the caves should be retrieved from the company and the allotment of the site cancelled.’ Toshali Cements is reportedly carrying out limestone surveys on an area, including the caves.
INTACH is in the process of conducting a comprehensive survey of the Mahandi Valley, in which the land lies, and has identified over 1000 monuments of ‘tangible heritage.’
New MD and CEOs for LafargeHolcim subsidiaries
26 February 2020India: Bimlendra Jha, Managing Director and CEO of Ambuja Cement, a member of LafargeHolcim, has left the company to pursue other interests. The company has appointed Neeraj Akhoury as MD and CEO with effect from 21 February 2020. His appointment is subject to the approval of the shareholders.
Meanwhile, LafargeHolcim’s other Indian subsidiary, ACC, which is in the process of merging with Ambuja, has promoted its chief commercial officer Sridhar Balakrishnan to the position of MD and CEO.
Ambuja’s profit halves
21 February 2020India: Lafarge Holcim-owned Ambuja Cement’s consolidated net profit almost halved to US$100.4m during the three months to 31 December 2019, from US$191.4m in the three months to 31 December 2018. The 2018 result was boosted by a one off benefit of US$121.5m, meaning that underlying operating profit has improved year-on-year. Ambuja’s revenue from operations was up by 6% to US$992m from US$936m.