Displaying items by tag: India
India: Orient Cement has paid US$46,000 in compensation to the families of two workers who were electrocuted at the Chittapur cement plant. The move follows tension in the local community, according to the New Indian Express newspaper. The cement producer has also agreed to offer employment to the members of both families and to grant pensions to the widows of the workers.
Closing the demand gap in India
04 October 2017It’s been a pessimistic month for the Indian cement industry with Ministry of Commerce & Industry data showing that cement production has fallen year-on-year every month since December 2016. This was followed by the Cement Manufacturers Association (CMA) saying that the industry was sitting on 100Mt/yr of excess production capacity. Now, the credit ratings agency ICRA has followed the data and downgraded its forecast for cement demand growth to not more than 4% for the 2017 - 2018 financial year.
Graph 1: Annual cement production in India. Source: Ministry of Commerce & Industry.
Graph 2: Monthly cement production growth rate year-on-year in India: Source: Ministry of Commerce & Industry.
Graph 1 shows a production peak in the 2015 - 2016 financial year before falling monthly production broke the trend in the 2016 - 2017 period. Graph 2 pinpoints the month it started to go wrong, November 2016, when the government introduced its demonetisation policy. Production growth went negative the following month in December 2017 and it hasn’t managed to right itself since then and grow. It’s convenient to blame the government for the slump in production but it troughed in February 2017 before taking a lower level of decline since then.
The Reserve Bank of India (RBI) annual report in August 2017 suggests that the policy failed in its principal purpose of reducing the kind of corruption that a cash heavy economy can hide such as tax avoidance. People reportedly managed to find ways to bypass the bank deposit limit and may have successfully laundered large amounts of cash without being caught. However, as commentators like the Financial Times have pointed out, the longer term implications of forcing the economy towards digital payments and increasing the tax base could yet be beneficial overall.
Graph 3: Cement production capacity utilisation rates in India. Source: UltraTech Cement.
Moving on, the CMA has blamed production overcapacity for the current mess and Graph 3 shows the problem starkly. If anything the CMA appears to have downplayed the over capacity crisis facing India, as UltraTech Cement’s figures (using data from the Department of Industrial Policy and Promotion) show an overcapacity of 155Mt in the 2016 – 2017 year and this will grow to a forecast 157Mt in the next financial year, even though the utilisation rate is expected to rise slightly. UltraTech Cement’s estimates don’t see the utilisation rate topping 70% until the 2020 – 2021 financial year. Analysts quoted in the Mint business newspaper concur, although they reckoned it would the rate would bounce sooner, in 2019 - 2020. Last month when the CMA moaned about the industry's excess capacity it pinned its hopes on infrastructure schemes like the Mumbai-Ahmedabad bullet train. This prompted an official at JK Cements to say that he didn't think that one train line was going to make much of a difference.
This is one reason why ICRA’s and the other credit agencies’ growth rate forecasts for cement demand are important, because they indicate how fast India might be able to close the gap between production capcity and demand. Unfortunately demonetisation scuppered ICRA’s growth prediciton for 2016 – 2017. It forecast a rate of 6% but it actually fell by 1.2%! So downgrading its forecast for 2017 – 2018, with fears of weather and the implementation of the Goods and Services Tax (GST) in the second half of the year, is ominious. Major cement producers such as Ultratech Cement and Ambuja Cement have based their road to recovery in their latest investor presentations on a 6% growth rate or higher. Pitch it lower and the gap doesn’t close. Here’s hoping for a brisk second half.
Ambuja Cement wins Harima Peethasar limestone block after delay
03 October 2017India: Ambuja Cement has won an auction for Nagaur's Harima Peethasar limestone block in Rajasthan following a procedural objection. JSW Group claimed that it was unable to place a counter bid in the online auction due to problems with the computer servers of Metals and Minerals Trading Corporation (MMTC), the state company running the sale, according to the DNA newspaper. After examination the claim was dismissed.
ICRA downgrades cement demand growth 2017 – 2018 due to slow first half
29 September 2017India: The credit ratings agency ICRA has downgraded its forecast for cement demand growth to 3.5 – 4% for the 2017 - 2018 financial year due to a slow first half of the year. It blamed the slow first half on a sand shortage in some regions, the implementation of the Real Estate Regulatory Authority and slowed construction activity in the west, according to the Press Trust of India. The agency expects demand to be subdued during the second quarter of the year due to weather and the implementation of the Goods and Services Tax (GST).
However, it forecasts demand to rebound afterwards as housing demand and infrastructure projects pick up. In July 2017 the agency had predicted a growth rate of 5%.
KEC International announces orders for cement plants
27 September 2017India: KEC International has secured various orders with a value of up to US$10.7m for structural and civil work on cement plants. The package also includes work on a car factory. The orders have been announced as part of a wider group of orders worth US$156m that are mainly in the power transmission, cable and railway industries.
India Cements orders mill system from FLSmidth
19 September 2017India: FLSmidth has signed a contract to deliver an OK 52-4 cement mill system for India Cements’ Shankar Nagar plant in Tamil Nadu. The engineering company will carry out the system engineering, procurement and supply machinery for a cement production capacity of 200t/hr of Ordinary Portland Cement at 3500 Blaine. The supply also includes a ROKSH 82 separator and gear units from FLSmidth product company, MAAG Gear.
"This contract reflects the strong relations we have had with the India Cements for almost a decade and our extensive knowledge in the region. We are happy to partner with them again," said Country Head of FLSmidth India, Carsten Riisberg Lund.
The new mill will replace the existing ball mills at the plant. The contract is scheduled for completion by the end of 2018.
Gujarat Sidhee Cement extends shutdown period at Sidheegram plant
19 September 2017India: Gujarat Sidhee Cement has extended the shutdown period of its Sidheegram plant until 28 September 2017 due to additional maintenance work on the kiln and coal mill. The maintenance period was originally scheduled to last until 25 August 2017. The cement producer said that cement grinding and packing operations will continue as normal and that the plant will meet all despatch requirements. Cement sales volumes are expected to be unaffected.
Indian cement industry sitting on 100Mt of excess capacity
18 September 2017India: The Cement Manufacturers Association (CMA) says that the local cement industry has 100Mt/yr of excess production capacity out of a total 425Mt/yr. The sector is sitting on over US$9.4bn of ‘sunk investment in surplus capacities’ but the CMA expects infrastructure schemes including railway projects to increase demand, according to the Press Trust of India. CMA President Shailendra Chouksey added that initiatives such as the Mumbai-Ahmedabad bullet train could raise cement consumption by 3 – 5Mt/yr.
In separate comments M P Rawal, the company administrator of JK Cements, confirmed the CMA’s assessment of the sector by saying that a slowdown in the construction industry in 2016 had led to a 70% utilisation rate of the country’s cement plants. He expected the same situation to persist in 2017. However, he warned that one bullet train project was unlikely to have a big impact on the situation.
JK Cement to invest US$234m on expansion drive
18 September 2017India: JK Cement plans to invest up US$234m over the next 3- 4 years on an expansion project to increase its cement production capacity by over 30% to 14Mt/yr. Rajnish Kapur, the head of the company’s cement business, told the Press Trust of India that the cement producer is considering expanding existing plants and building new ones due to anticipated government infrastructure spending and a good monsoon. He said that it is in the process of evaluating expansion opportunities at its Mangrol plant in Rajasthan. It is also looking to build a new plant in Panna, Madhya Pradesh. It intends to finance the expansion through a mixture of internal funds and via loans.
Two workers killed at Ambuja Cement’s Bhatapara plant
18 September 2017India: Two workers have died in an accident at Ambuja Cement’s Bhatapara plant in Baloda Bazar Tehsil, Chhattisgarh. Five labourers were inside a crushing mill at the site making repairs when it suddenly started operating, according to the Press Trust of India. Two of the workers, identified as Dhirendra Verma and Dilip Kumar Verma, came in contact with the machine leaving them with critical injuries. They subsequently died in hospital. A police investigation is underway.