Global Cement News

India: Ramco Cements plans to make capital expenditure (CAPEX) investments of US$154 – 167m in the 2023 and 2024 financial years. At the beginning of the 2023 financial year on 1 April 2022, Ramco Cements’ net debt was US$489m. It plans to pay back US$64.3m during the current financial year, with the ultimate aim of becoming net debt-free before the 2026 financial year.

Belgium/France: Ciments Calcia plans to transition 60% of its truck transport of cement in Belgium and France to rail. The company says that the shift will eliminate 5% of its CO₂ emissions. 400 rail cars currently distribute cement from Ciments Calcia’s 10 production sites. The producer said that the planned increase became possible due to logistics solutions developer Everysens’ transport digitisation software.

UK: The UK Department for Business, Energy and Industrial Strategy (BEIS) has granted Carbon Clean Euro701,000 under its Carbon Capture, Utilisation and Storage (CCUS) Innovation 2.0 programme. Carbon Clean says that it will partner with energy engineering company Doosan Babcock and Newcastle University to develop carbon capture systems which apply non-aqueous solvent (NAS) and rotating packed bed (RPB) technology together for the first time. The partners seek to overcome the challenges of scale and cost in order to advance the widespread deployment of CCUS systems.

The CCUS Innovation 2.0 programme is part of the UK government’s Euro1.17bn Net Zero Innovation Portfolio scheme.

South Korea: Korea Cement Association (KCA) members’ cement shipments fell by 90% over two days to 13,000t on 8 June 2022 from 180,000t/day prior to a truck driver strike which began on 7 June 2022. The association claimed that producers lost US$23m-worth of sales in the first two days of the strike, which also affects other industries. 17 ready-mix concrete batching plants in the Seoul area have suspended operations. The Korea Herald newspaper has reported that the association representing the construction industry has also voiced concerns about the supply situation.

We return to India to discuss a potential fight that may be brewing in the cement sector. Competition between UltraTech Cement and Adani Group started when the latter won the race to buy Holcim’s cement assets in the country in May 2022. However, the rivalry stepped up a notch this week when UltraTech Cement responded by approving a US$1.7bn investment for expansion.

The leading Indian producer announced that it was committing the funds towards increasing its cement production capacity by 22.6Mt/yr. This will include a mixture of expansions to existing sites and building new plants such as new integrated units, new grinding units and new terminals. UltraTech Cement currently has a previous round of expansion that is set to be completed by the end of the 2023 financial year. Commercial production at the newly announced projects is forecast to start by the end of the 2025 financial year. The company finished off by saying that the upgrade projects would maintain its position as the third largest cement producer outside of China, with its total production capacity rising to 159Mt/yr.

Unusually for these kinds of press releases though, UltraTech Cement made of point of doing the calculation for any readers who might want to know how much this new capacity might cost. It is US$76/t. Adani Group didn’t do this when it said it had agreed to buy Ambuja Cements and ACC from Holcim but, unsurprisingly, it cost more, at least US$94/t based on the cash figure Holcim released for the deal. Note that Adani Group has valued the acquisition at US$10.5bn, which would put the capacity cost up to US$150/t. Other zingers in the press release included Kumar Mangalam Birla’s quote that his company held, “... a deep and nuanced understanding of the market dynamics of the cement industry.” Both of these additions to the statement suggest that UltraTech Cement is making a point about its new competitor.

Bloomberg has framed the actions of UltraTech Cement and Adani Group in the cement sector as a brewing corporate battle between old and new money. Both Kumar Mangalam Birla, chair of Aditya Birla Group - the owner of UltraTech Cement, and Gautam Adani were in the top 10 of the Forbes list of the richest people in India in 2021. Birla comes from inherited wealth, although he has undeniably expanded UltraTech Cement greatly during his tenure as chair. Adani is self-made. Cement is just part of the empires of both men but one risk to UltraTech Cement is just how fast an expansion-driven competitor with concerns in power generation and logistics might decide to try to shake up the cement sector.

It is interesting at this early stage to glimpse part of the potential strategies both cement companies may be employing. Adani Group is in the process of buying its way into the cement sector at a relatively high price for capacity. UltraTech Cement is responding by building new capacity at a lower price. Research by Kotak Institutional Equities cited in the Bloomberg article suggests that Adani Group could increase its 70Mt/yr capacity up to 100Mt/yr at US$80 – 90/t. This would cost up to around US$2.5bn but it’s not impossible. Kotak also reckons UltraTech Cement can eke out around US$3 – 4/t more in earnings before interest, taxation, depreciation and amortisation (EBITDA) compared to the existing Ambuja Cements and ACC assets. Adani Group might be able to cut this gap down through creating synergies by further merging the two companies.

This adds to the feeling that UltraTech Cement is in a stronger position as the incumbent market leader. Yet risks abound in the current inflationary conditions and even less is certain if Adani Group is prepared to invest heavily enough. After all, UltraTech Cement had a production capacity of only 23Mt/yr in 2010. Less than a decade later it became India’s largest cement producer. It is now Adani Group’s next move in the battle of the cement billionaires.