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Small print can cause large consequences. Billion US Dollar consequences. Take the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act from 1957. Ambiguous wording in the legislation may have held up two prominent cement industry acquisitions in 2015. It also hangs over the recently announced purchase by UltraTech Cement of Jaiprakash Associates’ cement plants.

The MMDR was amended in January 2015. As the Times of India explained in mid-2015, a clause in the amendment said, “The transfer of mineral concessions shall be allowed only for concessions which are granted through auction.” However, it was unclear whether this meant historically allocated mines given via nominations or only newly allocated ones. Given the reliance of clinker plants on reliable mineral reserves this caused havoc. Cue confusion and large legal budgets.

LafargeHolcim’s divestment of two cement plants to Birla Corporation was one casualty. As a condition of the merger between Lafarge and Holcim the Competition Commission of India (CCI) required that the Jojobera and Sonadih cement plants in Eastern India be sold in 2015. Together the plants have a combined cement production capacity of 5.1Mt/yr. However the ambiguity over the 2015 MMDR Act clause on transfer of mining rights held the deal up. By February 2016 Birla Corporation had endured enough. It publicly complained about Lafarge India’s ‘inability’ to complete the deal and threatened legal action. LafargeHolcim retorted by asking the CCI if it could sell all of Lafarge India instead. It received the revised clearance and a new buyer is yet to be announced.

Another victim was UltraTech Cement in a previous attempt to buy Jaiprakash Associates’ cement assets. That time it was down to buy two integrated cement plants in Madhya Pradesh with a combined clinker production capacity of 5.2Mt/yr with associated mineral rights. The deal was agreed in December 2014 and then reported delayed in mid-2015. Finally, on 28 February 2016 the Bombay High Court rejected the deal, citing the MMDR Act as the prime cause.

Luckily for UltraTech Cement the story has a happy ending (so far) as it then announced that it was purchasing the majority of Jaiprakash Associates’ 22.4Mt/yr cement portfolio instead for US$2.4bn. It is hoped that the deal will be finalised by June 2017 but this partly depends on the MMDR Act being amended. Although UltraTech Cement have said they are looking at alternative routes to the deal in case the act isn’t amended.

Poor legal wording kiboshed at least two cement industry deals for over 10Mt/yr production capacity. Roughly, at the price UltraTech Cement is paying for its latest deal, that’s over US$1bn worth of Indian cement assets. Given the hard time the Indian cement industry had in 2015 the question should be asked regarding how much damage the MMDR Act amendment has done. One option for the beleaguered industry is to consolidate and cut its costs. This was massively delayed in 2015.

The proposed 2016 amendment to the MMDR Act reads as follows:

“Provided that where a mining lease has been granted otherwise than through auction and where mineral from such mining lease is being used for captive purpose, such mining lease will be permitted to be transferred subject to compliance with the terms and conditions as prescribed by the Central Government in this behalf.”

Let’s hope it does the trick this time.

India: Shailendra Chouksey, a director of JK Lakshmi Cement, has been appointed as the new president of the Cement Manufacturers' Association (CMA) for a two year term. He replaces OP Puranmalka, the managing director of Ultratech Cement. Previously Chouksey was the vice-president of the association.

"As the newly elected president of the CMA, my priority is to device methods to work with different stakeholders, including the government of India to spur the cement demand," said Chouksey.

Chouksey holds a PhD in managerial economics, an MBA in marketing from the Faculty of Management Studies, Delhi and a post-graduate degree in physics. He has worked in the cement industry for nearly 40 years.

Paraguay: Matias Cardarelli has been appointed the director of Yguazu Cementos, a joint-venture between Intercement and Concret Mix. Yguazu Cementos has a 0.4Mt/yr cement grinding plant with in Villa Hayes. Previously, Cardarelli worked for Ford Motors and Zurich Financial Services. He joined Intercement in Argentina in 2008.

Philippines: A shortage of cement has been reported in the Pangasinan province due to government projects, including road widening schemes, and private construction. The local Northern Cement Corp. (NCC) plant at Sison is producing around 100,000 bags per day according to the Philippines News Agency. Despite this dealers, and buyers are reporting cement shipments selling out hours after delivery, with prices spiking accordingly.

Department of Trade and Industry (DTI) monitoring of the NCC plant reports that 2.2 million bags were delivered by NCC in January 2016 and 1.9 million bags were delivered from 1 – 22 February 2016. The NCC is upgrading its local plant to double production to 200,000 bags per day by mid-March 2016. The DTI has asked consumers not to panic over this ‘temporary’ shortage.

Philippines: Holcim Philippines has reported a rise in net profit of 58% year-on-year to US$171m in 2015. Its revenue rose by 15% to US$793m. It attributed the gain to increased government spending in infrastructure projects and higher construction activity. Profits also benefited from a US$55m gain from the revaluation of an investment in an affiliate. The LafargeHolcim subsidiary also reported that it is increasing its cement production capacity to 10Mt in 2016 from 8Mt in 2015 to benefit from anticipated infrastructure spending.

Spain: Cementos Molins has reported a rise in its net profit of 65% year-on-year to Euro50.8m in 2015. The Spanish cement producer also managed to reduce its loss in the Spanish market to Euro13.1m in 2015 from Euro27.7m in 2014. Sales outside of Spain also improved, with its profit rising by 9% to Euro64m. Particular improvements were noted in Mexico (20%) and Argentina (37%), according to Expansion.

India: The National Green Tribunal has issued notices to 13 cement companies on a petition alleging that they are violating its orders and environmental norms as well as the provisions of the Motor Vehicles Act, 1988, by causing air pollution. The petitioner, Neena Pradeep, has also accused the cement companies of overloading their trucks with cement and clinkers in order to save toll tax, according to the Hindu. Violations by Shree Cement and JK Cement were highlighted during the hearing. They have allegedly overloaded their trucks by 200 - 250%.

China: The Ministry of Industry and Information Technology (MIIT) and related departments are considering draft guidelines on eliminating outdated production capacity in cement, ship-making, electrolytic aluminium and glass industries, according to Xinhua. At least 500Mt of ‘low-grade’ cement production capacity will be phased out.

The central government decided to promote supply-side reform at the end of 2015. Eliminating outdated capacity is a top priority. Methods to do this include phasing out outdated capacity, removing ‘zombie’ enterprises and promoting industrial reorganisation.

Kong Xiangzhong, vice president of China Cement Association, has advised the central government to provide certain compensation for the industry and establish a special fund so as to appropriately deal with the re-employment of redundant personnel and enterprise debts. Several provinces have specified their targets. Guangdong Province plans to cut clinker production capacity to 110Mt by the end of 2018.

India: UltraTech Cement's US$2.5bn proposed acquisition of Jaiprakash Associates' cement plants is expected to be completed by June 2017, according to UltraTech Cement.

"We have to ink definitive agreements and get permission from the High Courts. This will take time. The firm expects the agreement to be finalised in the next 12 - 15 months. Expect it to consummate by June 2017," said UltraTech Cement Chief Financial Officer Atul Daga.

Daga added that UltraTech is also looking at alternative routes in case proposed amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act do not happen. In February 2016 the government took views from public, states and industry on amending the MMDR Act to include provisions allowing transfer of captive mines granted through procedures other than auction.

The transfer of captive mining leases, granted other than through auction, would allow banks and financial institutions to liquidate assets where a company or its captive mining lease is mortgaged. The move will allow mergers and acquisitions in the Indian domestic market, especially in the cement sector, in which several deals are currently on hold.

UltraTech Cement signed a Memorandum of Understanding to buy Jaiprakash Associates’ cement plants in late February 2016. Altogether, the cement plants have a total cement production capacity of 22.4Mt/yr.

Rwanda: The management of Cimerwa has asked that the government prioritise locally-made cement, according to the New Times. Despite opening a new cement plant in mid-2015 and cutting its prices, the local producer has found it difficult to sell its product despite growth in the construction sector.

"We recognise that while the regional market is large enough for everybody, as local company, and as Rwandan consumers, we all have a duty to contribute to the economy by consuming locally-produced goods and services in order to reduce Rwanda's import bill and build local businesses," said Busisiwe Legodi, the chief executive officer of Cimerwa. The company is also considering setting up depots across Rwanda to further cut its prices.