Displaying items by tag: Capacity utilisation

Pakistan: The cement industry in Pakistan is experiencing a significant decline, with local dispatches for September 2024 projected to fall by 22% year-on-year to approximately 2.79Mt. This decline is reportedly due to a slowdown in construction activities, exacerbated by rising costs of construction materials. According to Topline Pakistan Research, local cement sales for the first quarter of the financial year 2025 are also expected to decrease by 21% compared to the same period in 2023.

Despite a slight month-on-month increase in dispatches from 2.75Mt in August 2024, the year-on-year data highlights a continuing slump in construction and a sharp increase in cement prices. However, there cement exports are projected to increase by 27% month-on-month and 36% year-on-year. Total cement sales for September are estimated at 3.56Mt, marking a 14% decline year-on-year but a 6% increase from August 2024. Capacity utilisation in the sector is estimated at 52% for September 2024, an improvement from August 2024’s 47% but still below the 60% recorded in September 2023.

India: Cement producers in North, Central and East India have reduced production by 10 - 15% in the second quarter of 2024 due to low demand and project delays after an extended monsoon, according to The Hindu Business Line. Clinker utilisation stands at 70-75% for the quarter, down from around 80% during April – June 2024. South India remains comparatively unaffected.

India: Cement volumes in India are projected to rise by 7-8% year-on-year in the 2025 financial year, driven by sustained demand from the infrastructure and housing sectors. This forecast is supported by the government's focus on infrastructure projects, sanction of additional houses and industrial capital expenditure, according to a report by the credit rating agency ICRA.

The Indo-Asian News Service reports that capacity addition in the cement industry is estimated at 63-70Mt between FY25 and FY26, with approximately 33-35Mt expected in FY25 alone. The capacity utilisation is expected to rise to 71% in FY25 from 70% in FY24, backed by higher cement volumes.

Pakistan: The Economic Survey 2023-24, unveiled by Finance Minister Muhammad Aurangzeb, reported that the capacity utilisation of Pakistan's cement industry fell to 54.6% in the first nine months of the 2024 financial year (July 2023 – April 2024), the lowest level recorded since data collection began in 2006. Despite an overall production capacity of 82.3Mt, the industry managed only 37.5Mt/yr in local dispatches and exports during the period.

China: Capacity utilisation in the Chinese cement sector has dropped to 50% in April 2024, down from 80% in April 2023. Reuters reported the development, citing data from China Coal Industry. Local coal suppliers reportedly face depressed demand.

India: The Ramco Cements plans to more than double the clinker capacity of its Kalavatala cement plant in Andhra Pradesh to 6.3Mt/yr at a cost of US$151m. The new Line 2 will be equipped with a 15MW waste heat recovery (WHR) unit. The line will raise the producer’s installed cement capacity to 26Mt/yr and its clinker capacity to 19Mt/yr with commissioned scheduled by early 2026. The Ramco Cements plans to source the funds through internal accruals and bank borrowings.

At the same time, the company will invest US$18.4m in the construction of a 10MW WHR plant at its Ramasamy Raja Nagar cement plant in Tamil Nadu, scheduled for commissioning by March 2025. Both WHR projects will raise The Ramco Cements’ total WHR capacity by 58% to 68MW.

The Ramco Cements said that Kalavatala plant is currently operating at full capacity utilisation. It added that it decided to expand the plant in response to this and further ‘demand potential.’ In the current, fourth quarter of the 2024 financial year (1 January – 31 March 2024), the company expects to make capital expenditure (capex) investments of US$47m, followed by US$205m in the upcoming 2025 financial year.

India: Ramco Cements reported 5% growth in sales in the third quarter of the 2024 financial year (1 October – 31 December 2023), to US$254m. Rising cement volumes – up by 9.9% to 4Mt – helped to drive the growth in sales. Despite weather-related disruptions, Ramco Cements raised its earnings before interest, depreciation, taxation, and amortisation (EBITDA) rose by 37% to US$48.4m. A 28% reduction in fuel prices to US$138/t of cement spurred earnings growth. Cement capacity utilisation during the quarter fell quarter-on-quarter to 74% to 82% previously.

India: Sagar Cements recorded sales of US$80.5m in the third quarter of the 2024 financial year, up by 16% year-on-year from US$69.3m during the corresponding quarter of the previous financial year. Cement sales volumes rose by 14% year-on-year. The Hindu BusinessLine News has reported that the growth allowed Sagar Cements to reduce its net losses by 57%, to US$1.22m.

Managing director Sreekanth Reddy said “Favourable prices prevailed in our key markets. As far as EBITDA and margins are concerned, we observed a significant enhancement on a per-tonne basis, consistent with our earlier projections.” Reddy added “We anticipate this positive trend to persist in the future, supported in part by higher utilisation levels of recently-acquired units and strategic initiatives aimed at promoting the use of green power, alternative fuels and the deployment of electric trucks and wheel loaders.”

UltraTech Cement approved a US$1.5bn capacity expansion plan this week. The initiative intends to add 21.9Mt/yr in production capacity by setting up four new cement plants, four upgrades and four new terminals. It will also add 39MW in waste heat recovery (WHR) units and alternative fuels feeding and handling investments. Commercial production at the new sites is scheduled to start from the 2026 financial year onwards.

The company is India’s largest cement producer by production capacity and the third biggest globally outside of China. Yet it is still growing as this latest announcement shows. Kumar Mangalam Birla, the chair of parent company Aditya Birla Group, revealed the ambition earlier this year, that UltraTech Cement wants to reach a production capacity of 200Mt/yr in the near future. This is likely to be ordinary Portland cement (OPC) capacity from both integrated and grinding plants. It reported a figure of 132Mt/yr in its annual report for the 2023 financial year. This latest capacity investment is its third in recent years. In December 2020 it announced investment of just below US$560m to add 12.8Mt/yr of capacity with commissioning by around the end of the 2023 financial year. It later confirmed that most of this had been completed on schedule. Then another US$1.55bn investment was ordered in June 2022 to add 22.6Mt/yr. This tranche of new plants and terminals is planned to be completed by the end of the 2025 financial year.

Graph 1: UltraTech Cement’s OPC production capacity and utilisation rate, 2017 - 2023 financial years. Source: Company annual reports.

The graph above shows how the company’s capacity has grown since 2017. This is the year in which it acquired 21Mt/yr of capacity from Jaiprakash Associates for US$2.5bn. These plants then show up in the capacity figure for 2018. The next big bump to capacity arrived in 2019 when UltraTech Cement was able to complete its purchase of Century Textiles & Industries, adding another 15Mt/yr of capacity. Since then though it has mainly been newly built plants or upgrades. It is also worth noting the capacity utilisation figures the company has reported. There has generally been an upward trend since 2017 with a dip during the Covid-19 pandemic years in 2020 and 2021. This has also been happening despite adding more capacity through both acquisitions and building new plants. The other point to note is that the cement company is mostly a wholly India-based one. It has presences in the UAE, Bahrain and Sri Lanka but these are small compared to the operations back home. In the 2023 financial year, 23 of its 24 integrated plants were domestic, 25 out of 29 grinding plants were and seven out of eight terminals were too.

UltraTech Cement’s current nearest rival, Adani Group, appeared on the scene in 2022 when it bought Holcim’s subsidiaries in India. The timing may have been coincidental but, after Holcim agreed to sell to Adani Group in May 2022, UltraTech Cement announced its US$1.55bn capacity drive in June 2022. A year later in June 2023 Adani Group targeted a capacity of 140Mt/yr by 2028. To give an idea of the market both of these companies are competing in, Ratings Agency ICRA’s last forecast in September 2024 predicted that cement volumes would grow by 9 - 10% in the 2024 financial year. Capacity expansion by all cement producers was expected to be driven by “steady demand for housing and increased government investments in infrastructure.”

UltraTech Cement may be the fastest expanding cement company in the world at the moment. India certainly needs the cement as its population overtook China’s in April 2023. The Aditya Birla Group company is not taking any chances with its competitors by maintaining its lead in capacity. One risk it may want to watch out for though is India’s nascent Carbon Credit Trading Scheme. Some form of carbon trading for the petrochemicals, steel, cement and paper sectors looks set to start in the second half of the 2020s. However, any such scheme is likely to favour incumbent manufacturers with newer plants. With the country’s net zero target set at 2070, UltraTech Cement has plenty of room to manoeuvre.

Ukraine: Cement companies produced 4.75Mt of cement during the first eight months of 2023, up by 30% year-on-year from eight-month 2022 levels. Interfax-Ukraine News has reported that producers are operating at 60% production capacity.

Liudmyla Kripka, executive director of the Ukrainian cement association, Ukrcement, said “If we compare it with last year, when the country’s economy was in shock from Russia’s treacherous attack on Ukraine and the start of the full-scale war, the situation has improved somewhat. Cement production in the first half of 2023 grew by 26%, and in the first eight months by 30%, compared to last year.” Kripka added “We are still far from the indicators of 2021, but the dynamics are encouraging. Once there was a prospect, work for the future began. Cement producers, even in war conditions, are investing in Ukraine and the economic restoration of the regions. This expands the production capacity of the industry as a whole and contributes to the creation of new jobs.”