CEMENTing India

India has 148 large cement plants (of which 95 plants exceeding 1 million tonne capacity) with aggregate of 220 million tonnes capacity, and total turnover $18.5 billion (Rs 100,000 crores)

[20crores tonnes X 1000 = 20,000 crores kg X Rs 5 per k.g = Rs 1 lac crores market]

Cement making process

Limestone -> Crushing -> Four stage suspension pre-heater -> Rotary Klin -> Clinker -> clinker cooling -> clinker yard=gypsum + fly ash -> Grinding mills/ Ball mills -> Cement

The limestone crusher is used for crushing the limestone boulder into smaller pieces. The crushing is a high power consumption operation.
During 2005, global cement production was 2220 million tones, with China accounting for nearly 45% of the total output followed by India accounting for 6% of the share and the US for 4.5% in world cement production – others - Japan.
At present, 100 per cent foreign direct investment (FDI) is permitted in the cement industry. To set up a cement plant in India, with an investment of over US$ 22 million entrepreneurs are required to obtain environmental clearance from the Ministry of Environment. 100 per cent FDI is also allowed for private cement companies to
set up power projects as well as coal or lignite mines for captive consumption.
Highly fragmented 50 players and 150 plants.
Highly regional – players clustered around limestone deposites
Competition is also regional bcoz low value of the commodity makes long distance transportation unviable. industry being divided into five major regions viz.
north, south, west, east and the central region.
The industry has undergone rapid technological upgradation and growth, and now, some of the cement plants in India are comparable to the world’s best operating plants in all respects. In recent years, the process of consolidation has occurred in cement industry,
The cement industry accounts for only 3% of the total coal requirements. Arising from the lack of availability of quality power, cement companies have been increasingly using captive power to augment their requirements.
The Cement manufacturing is an energy intensive process. Power cost accounts for 13-18% of total cost of cement manufacturing.
Two critical materials for the cement production are Limestone as raw material and coal as
fuel. Cost of procuring coal can constitute as much as 9-11% of total production costs for our cement facility. Gypsum constitutes 0.71% of our total manufacturing cost. Transport cost of cement and our raw material (after taking into consideration transport subsidy) accounts for around 17-23% of the total cost. any increase in price of fuel
Coal having Calorific value of 4500 Kcal /Kg. and ash content as low as 30.06% is available in plenty in Jharkhand.


LB: Power & Fuel cost per tonne of cement sold apprx Rs 700. Consistent strength in international coal prices will continue to impact the profitability of Indian cement companies. Generally cement companies consume 130-140 kg of coal to produce one tonne of cement. assumed that the companies will consume 90 units of electricity to produce one tonne of cement

Ordinary Portland Cement
OPC is produced by inter-grinding clinker, performance improver and gypsum in a cement mill. OPC is further classified, as relevant in our case as, 43 Grade and 53 Grade OPC. OPC is manufactured in three grades, viz. 33 grade, 43 grade and 53 grade, the numbers indicating the compressive strength obtained after 28 days, when tested as per the stipulated procedure.

53 Grade OPC is high strength cement
According to BIS requirements, 53 Grade OPC should have a 28 day compressive strength of not less than 53 MPA.
Portland Pozzolana Cement
PPC is blended cement produced by adding pozzolanic materials, such as fly ash, volcanic ash and calcined clay to clinker. Our Company has encouraged customer awareness and acceptance of PPC (through training programs designed by us for engineers and masons) as it has lower production costs and offers higher margins than OPC. PPC can be used for the majority of construction projects, such as in the building of houses, high-rise
buildings and bridges. The production process for PPC is similar to that for OPC, but fly ash the pozzolanic material which is generally used, is mixed with clinker in the cement mill stage of manufacturing. The fly ash content of PPC produced by us is normally between 20% and 25%. The use of fly ash enables cement to be produced using less clinker. This helps to reduce production costs as fly ash, being a waste product from the operation of coal fired power stations, is readily available and is a cheaper commodity than clinker.
The company is setting up an integrated Clinkerisation and Cement grinding plant of 800 TPD capacity expandable to 1600 TPD in the Hazaribagh district of Jharkhand at Patratu Industrial Estate, for manufacturing Clinker, Ordinary Portland Cement (OPC), Portland Pozzolona Cement (PPC) and Portland Slag Cement (PSC) is Rs 125 crores.

RMC is not yet break-even in India. Only 5% is RMC unlike developed countries where 60% is RMC – BS May09
Cement Supply dynamics
Commodity – Cyclical business
Like in most commodity industries, the business cycle in the cement industry follows a set
pattern.
When the demand-supply gap narrows, price realizations improve and companies
increase their capex outlays for building capacities and increasing their market shares.
Most of the large companies with high level of financial flexibility are the first to take off in good times as they are continuously looking at improving their market share.
DB: Cement prices spiraling to a decadal high have left most Indian cement producers scrambling
for new capacity additions at a frenzied pace for the first time in the last two decades.
HDFC : The Industry planned this massive capacity expansion of 108 mt because they had never seen such a good run till FY2006.
During this period, the capacity utilization rate of the Industry reached an all time high
level of ~99% in FY08. In the period FY05 to FY08, cement demand grew at a CAGR of
10.5% and average retail price increased by a whopping 41% to Rs 230 per bag. Cement
manufacturers made huge profits and the Industry average per tonne of operating profits
crossed Rs 1100. Driven by theses profitability levels, average RoCE level of the Industry
crossed the 25% mark.

cement demand should grow at a CAGR of 16% over FY09- FY11E to absorb the incremental supply, as the effective production capacity is expected to grow at a CAGR of 18% during this period. We expect the oversupply to be 20.1 mt and 45.4 mt during FY10E and FY11E respectively. expect cement prices to remain under pressure. Indian Cement Industry is set to increase production capacity by 28.3 mt in FY09E,
41.4 mt in FY10E and 18.9 mt in FY11E. This will take the aggregate installed capacity
to ~288 mt. Of the new capacities, ~ 41 mt (~50%) is expected to be commissioned in the South, followed by 13.3 mt (~16.4%) in the North and 13 mt (16.1%) in the East.

DB: Actual placement of orders with equipment suppliers should be taken as confirmed with the
first advance payment or letter of intent. While almost all equipment suppliers recognise a
letter of intent as a confirmation of new orders, we believe that the first advance payment
received by them is a better metric to measure equipment orders. Be that as it may, letters
of intent received by cement equipment suppliers point to a total of 73.7MTPA of cement
capacities to be commissioned over FY07-10
Project delays add a different twist to likely capacity additions.
DB: Our analysis shows that only 51m tonnes, i.e. 67% of the ordered capacity and 47% of the announced capacity, will get commissioned till FY2010 (Mar). Imports are unlikely to pose a threat due to tight regional demandsupply and port bottlenecks. Longer term, we expect Indian cement prices to increase in line with inflation – note that India’s low per capita consumption is near an inflection point
Earnings of Shree Cement are the most sensitive to a decline in realization followed by India Cement. However, on the volume front, Ambuja Cement is most susceptible to a possible decline. prefer stocks of companies which have commissioned their capex ahead of their peers or those who have adopted cost savings measures.
cement companies, generally enter into prospecting/mining lease with the respective state Governments. the Government generally controls the prices. Most
of the cement companies are assigned quarterly linkages for coal (fuel) from specific coalfields.

The seven states viz. Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat, Karnataka, Tamil Nadu and Maharashtra, account for around 74 per cent of the total domestic capacity
As of December 31, 2003, around 94% of the capacity was based on dry process technology as compared to 84 % in 1993-94. The shift is due to lower coal consumption in the dry process technology

it costs Rs 2.4/ 2.5 to produce 1kg cement (ie Rs 2,400 per tonne) but transport cost is also very high.