Cement Industry
Cement Industry
Cement Industry
Con ten t s
1 . I n t roduc t i on
3 .P roce s s Techno lo gy
4 .P rocedu re
Raw mate r i a l Prepa ra t i on
Raw Gr ind in g
Py rop roce s s i n g
F in i s h Gr ind i n g And D i s t r i bu t i on
6 .Demand Dr i ve r s
7 .Co s t
Capac i t y Ut i l i z a t i on
Power
Fre i gh t
Ope ra t i n g Marg i n s
8 .Gove rnment Po l i c e s
Pr i ce and D i s t r i bu t i on Con t ro l s
Pa r t i a l Decon t ro l
To t a l Decon t ro l
Gove rnmen t con t ro l
9 .Requ i remen t s
Coa l
E le c t r i c i t y
I n f ra s t ruc tu re
L imes tone
Tran spo r t a t i on
I n f ra s t ruc tu re f o r Fu tu re
I n cen t i ve s I n S t a te s
I n s t a l l ed Capac i t y
11 .Compan ie s I n I nd i a
12 . I s sue s
13 .Rank in g s
14 .Conc lu s i on
1.INTRODUCTION
The cement industry is one of the main beneficiaries of the infrastructure boom.
With robust demand and adequa te supply, the industry has bright future. The Indian
Cement Industry with total capacity of 165 million tones is the second largest after
China. Cement industry is dominated by 20 companies who account for over 70% of
the market. Individually no company accounts for over 12% of the market. The
major players like L&T and ACC have been quiet successful in narrowing the gap
between demand and supply. Private housing sector is the major consumer of
cement (53%) followed by the government infrastructure sector. Similarly northern
and southern region consume around 20%-30% cement while the central and
western region are consuming only 18%-16%.
India is the 2nd largest cement producer in world after china .Right from laying
concrete bricks of economy to waving fly over’s cement industry has shown and
shows a great future. The overall outlook for the industry shows significant growth
on the back of robust demand from housing construction, Phase-II of NHDP (National
Highway Development Project) and other infrastructure development projects.
Domestic demand for cement has been increasing at a fast pace in India. Cement
consumption in India is forecasted to grow by over 22% by 2009-10 from 2007-
08.Among the states, Maharashtra has the highest share in consumption at
12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading
with 14.72% of total production followed by Rajasthan. Cement production grew at
the rate of 9.1 per cent during 2006-07 over the previous fiscal's total production of
147.8 mt (million tons). Due to rising demand of cement the sales volume of
cement companies are also increasing & companies reporting higher production,
higher sales and higher profits. The net profit growth rate of cement firms was 85%.
Despite the growth of Indian cement industry India lags behind the per capita
production. Supply for cement is expected to remain tight which, in turn, will push
up prices of cement by more than 50%. The most important factor for better prices
is consolidation of the industry. It has just begun and we will see more consolidation
in the coming years. Other budget measures such as cut in import duty from 12.5
per cent to nil etc. are all intended to cut costs and boost availability of cement.
Sadly the adverse effects of global slowdown have not speared this industry too.
Demand is sluggish, the government is keeping an eagle eye on prizes, domestic
coal and pet coke, prizes have increased sharply and utilizations rates are down.
The numbers coming out are a reflection of grim times. ACC the country’s largest
cement company that’s controlled by Swiss giant HOLCIM, registered 2% fall in
august sales. It is the biggest fall since Feb 2007. Production fell by 5%.
Now the question arise in front of the government is whether the demand by the
government is possible to increase through expenditure on infrastructure or not
according to the current state of economy when so many crises are going on or how
the government allocation of US$ 3.23 billion for the National Highway
Development, Project will keep the demand for cement alive? And to what extent
the prizes of cement should be increase so that consumer can’t affect.
Cement industry in India has also made tremendous strides in technological up
gradation and assimilation of latest technology. Presently, 93 per cent of the total
capacity in the industry is based on modern and environment-friendly dry process
technology. The induction of advanced technology has helped the industry
immensely to conserve energy and fuel and to save materials substantially. Indian
cement industry has also acquired technical capability to produce different types of
cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC),
Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening
Cement Types
Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Some of
the major clusters of cement industry in India are: Satna (Madhya Pradesh),
Chandrapur (Maharashtra), Gulbarga (Karnataka), Yerranguntla (Andhra Pradesh),
Nalgonda (Andhra Pradesh), Bilaspur (Chattisgarh), and Chandoria (Rajasthan).
2.CURRENT SCENARIO
The Indian cement industry is the second largest producer of quality cement, which
meets global standards. The cement industry comprises 130 large cement plants
and more than 300 mini cement plants. The industry's capacity at the end of the
year reached 188.97 million tons which was 166.73 million tons at the end of the
year 2006-07. Cement production during April to March 2007-08 was 168.31 million
tons as compared to 155.66 million tons during the same period for the year 2006-
07.Despatches were 167.67 million tons during April to March 2007- 08 whereas
155.26 during the same period. During April-March 2007-08, cement export was
3.65 million tons as compared to 5.89 during the same period.
Cement industry in India is currently going through a consolidation phase. Some
examples of consolidation in the Indian cement industry are: Gujarat Ambuja taking
a stake of 14 per cent in ACC, and taking over DLF Cements and Modi Cement; ACC
taking over IDCOL; India Cement taking over Raasi Cement and Sri Vishnu Cement;
and Grasim's acquisition of the cement business of L&T, Indian Rayon's cement
division, and Sri Digvijay Cements. Foreign cement companies are also picking up
stakes in large Indian cement companies. Swiss cement major Holcim has picked up
14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's
acquisition has led to the emergence of two major groups in the Indian cement
industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla
group through Grasim Industries and Ultratech Cement. Lafarge, the French cement
major has acquired the cement plants of Raymond and Tisco. Italy based
Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries' cement
plant in Andhra Pradesh, and German cement company Heidelberg Cement has
entered into an equal joint-venture agreement with S P Lohia Group controlled Indo-
Rama Cement.
3.PROCESS TECHNOLOGY
While adding fresh capacities, the cement manufacturers are very conscious of the
technology used. In cement production, raw materials preparation involves primary
and secondary crushing of the quarried material, drying the material (for use in the
dry process) or undertaking a further raw grinding through either wet or dry
processes, and blending the materials. Clinker production is the most energyintensive
step, accounting for about 80% of the energy used in cement Production.
Produced by burning a mixture of materials, mainly limestone, silicon oxides,
aluminum, and iron oxides, clinker is made by one of two production processes: wet
or dry; these terms refer to the grinding processes although other configurations
and mixed forms (semi-wet, semi-dry) exist for both types. In the dry process, the
raw materials are ground, mixed, and fed into the kiln in their dry state. In the wet
process, the crushed and proportioned materials are ground with water, mixed, and
fed into the kiln in the form of slurry.
4.PROCEDURE
The main raw materials used in the cement manufacturing process are limestone,
sand, shale, clay, and iron ore. The main material, limestone, is usually mined on
site while the other minor materials may be mined either on site or in nearby
quarries. Another source of raw materials is industrial by-products. The use of byproduct
materials to replace natural raw materials is a key element in achieving
sustainable development.
Raw Gr i nd in g
In the wet process, each raw material is proportioned to meet a desired chemical
composition and fed to a rotating ball mill with water. The raw materials are ground
to a size where the majority of the materials are less than 75 microns. Materials
exiting the mill are called "slurry" and have flowability characteristics. This slurry is
pumped to blending tanks and homogenized to insure the chemical composition of
the slurry is correct. Following the homogenization process, the slurry is stored in
tanks until required.
In the dry process, each raw material is proportioned to meet a desired chemical
composition and fed to either a rotating ball mill or vertical roller mill. The raw
materials are dried with waste process gases and ground to a size where the
majority of the materials are less than 75 microns. The dry materials exiting either
type of mill are called "kiln feed". The kiln feed is pneumatically blended to insure
the chemical composition of the kiln feed is well homogenized and then stored in
silos until required.
Py rop roce s s i n g
Whether the process is wet or dry, the same chemical reactions take place. Basic
chemical reactions are: evaporating all moisture, calcining the limestone to produce
free calcium oxide, and reacting the calcium oxide with the minor materials (sand,
shale, clay, and iron). This results in a final black, nodular product known as
"clinker" which has the desired hydraulic properties.
In the wet process, the slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0
m in diameter and from 120.0 m to 165.0 m in length. The rotary kiln is made of
steel and lined with special refractory materials to protect it from the high process
temperatures. Process temperatures can reach as high as 1450oC during the clinker
making process.
In the dry process, kiln feed is fed to a preheater tower, which can be as high as
150.0 meters. Material from the preheater tower is discharged to a rotary kiln with
can have the same diameter as a wet process kiln but the length is much shorter at
approximately 45.0 m. The preheater tower and rotary kiln are made of steel and
lined with special refractory materials to protect it from the high process
temperatures.
Regardless of the process, the rotary kiln is fired with an intense flame, produced by
burning coal, coke, oil, gas or waste fuels. Preheater towers can be equipped with
firing as well.
The rotary kiln discharges the red-hot clinker under the intense flame into a clinker
cooler. The clinker cooler recovers heat from the clinker and returns the heat to the
pyroprocessing system thus reducing fuel consumption and improving energy
efficiency. Clinker leaving the clinker cooler is at a temperature conducive to being
handled on standard conveying equipment.
Today, cement from Andhra is going all over India, including Assam, Meghalaya,
Jharkhand, Orissa, West Bengal, Chattisgarh, Gujarat and Maharashtra. More cement
is likely to flow into Tamil Nadu from the state in view of cut in sales tax. Any further
increase in demand in the South India will benefit the cement industry here. Cement
movement from Gujarat to Mumbai is also coming down due to exports while
cement movement from Orissa into Andhra has stopped and, in fact, cement is
flowing into Orissa as well.
Earlier in 2006-07, the housing sector alone consumed 65 per cent of the total
domestic consumption. With the launch of several infrastructure projects, the
housing consumption may come down to 55 per cent as the infrastructure and other
sectors are expected to move up to 45 per cent from the present 35 per cent. Still,
the main sector of consumption continues to be housing, including commercial
space, occupying more than 60 per cent. The current demand in the state for 2005-
06 is expected to cross 15 million tons (11.5 million tons). We expect the demand
here to go past the 17.5-million mark in 2006-07 in view of irrigation and
infrastructure projects being taken up in the state. Weaker sections’ housing,
construction of public toilets, schools in rural areas apart from several private and
public infrastructure projects will also give tremendous boost to the cement
consumption in the state. Most importantly, irrigation projects, worth nearly Rs 1
lakh crore, will trigger unprecedented demand for the next 5-7 years.
Cement consumptions are as follows:
6.DEMAND Drivers
Indian cement demand skewed towards housing
The demand from the housing sector is ~53% of the total Indian cement demand.
There are fears of a slowdown in the demand from the housing sector due to a drop
in real estate prices in the country. The worry is that builders may postpone
construction of new buildings if the property prices were to correct.
7.COST
Over the past five years, cost of cement production has grown at a CAGR of 8.4%.
Also, the producers have been able to pass on the hike in cost to consumers on the
back of increased demand. Average realizations have increased from Rs. 1,880 per
tonne in FY 03 to Rs. 3,133 per tons in FY 07, at a CAGR of 13.6%, which has been
reflected in higher profit margins of the industry.
To reduce the cost of production, the industry has focused on captive power
generation. Proportion of cement production through captive power route has
increased over the years. Also, cement movement by rail has increased over the
years. Freight and energy costs are also increasing; however, in the current market
scenario, manufacturers have the flexibility to pass on the increase in costs to
endconsumers.
Let us have a look at the cost factors affecting the cement industry
Power : The cement industry is energy intensive in nature and thus power costs
form the most critical cost component in cement manufacturing (about 30% to total
expenses). Most of the companies resort to captive power plants in order to reduce
power costs, as this source is cheaper and results in uninterrupted supply of power.
Therefore, higher the captive power consumption of the company, the better it is for
the company.
8. Government Policies
Government policies have affected the growth of cement plants in India in various
stages. The control on cement for a long time and then partial decontrol and then
total decontrol has contributed to the gradual opening up of the market for cement
producers. The stages of growth of the cement industry can be best described in the
following stages:
To t a l Decon t ro l ( 1989 )
In the year 1989, total decontrol of the cement industry was announced. By
decontrolling the cement industry, the government relaxed the forces of demand
and supply. In the next two years, the industry enjoyed a boom in sales and profits.
By 1992, the pace of overall economic liberalization had peaked; ironically,
however, the economy slipped into recession taking the cement industry down with
it. For 1992-93, the industry remained stagnant with no addition to existing
capacity.
Government Con t ro l s
The prices that primarily control the price of cement are coal, power tariffs, railway,
freight, royalty and cess on limestone. Interestingly, all of these prices are
controlled by government
9.REQUIREMENTS
Coa l
The consumption of coal in a typically dry process system ranges from 20-25% of
clinker production. This means for per ton clinker produced 0.20-0.25 ton of coal is
consumed. This contributes 35-40% of the production cost. The cement industry
consumes about 10mn tons of coal annually. Since coalfields like BCCL supply a
poor quality of coal, NCL and CCL the industry has to blend high-grade coal with it.
The Indian coal has a low calorific value (3,500-4,000 kcal/kg) with ash content as
high as 25-30% compared to imported coal of high calorific value (7,000-8,000
kcal/kg) with low ash content 6-7%. Lignite is also used as a fuel by blending it with
coal. However this process is not very common.
E lec t r i c i t y
Cement industry consumes about 5.5bn units of electricity annually while one ton of
cement approximately requires 120-130 units of electricity. Power tariffs vary
according to the location of the plant and on the production process. The state
governments supply this input and hence plants in different states shall have
different power tariffs. Another major hindrance to the industry is severe power
cuts. Most of the cement producing states like AP, MP experience power cuts to the
tune of 25-30% every year causing substantial production loss.
I n f r a s t ruc tu re
To reduce uncertainty relating to power, most of the leading companies like ACC,
Indian Rayon, and Grasim rely on captive power plants. A few companies are also
considering power-generating windmills.
L imes tone
This constitutes the largest bulk in terms of input to cement. For producing one ton
of cement, approximately 1.6 ton of limestone is required. Therefore, the cement
plant location is determined by the location of limestone mines. The major cash
outflow takes place in way of royalty payment to the central government and cess
on royalties levied by the state government. The total limestone deposit in the
country is estimated to be 90 billion tons. AP has the largest share -- 34%,
Karnataka 13%, Gujarat 13%, M.P 8%, and Rajasthan 6.5%. The plants near the
limestone deposit pay less transportation cost than others.
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Report on Cement Industry In India By: Shobhit Chandak
Tran spo r t a t i on
Cement is mostly packed in paper bags now. It is then transported either by rail or
road. Road transportation beyond 200 kms is not economical therefore about 55%
cement is being moved by the railways. There is also the problem of inadequate
availability of wagons especially on western railways and southeastern railways.
Under this scenario, manufacturers are looking for sea routes, this being not only
cheap but also reducing the losses in transit. Today, 70% of the cement movement
worldwide is by sea compared to 1% in India. However, the scenario is changing
with most of the big players like L&T, ACC and Grasim having set up their bulk
terminals.
I n f r a s t ruc tu re f o r Fu tu re
The consumption of cement is determined by factors influencing the level of
housing and industrial construction, irrigation projects, and roads and laying of
water supply and drainage pipes etc. The level and growth of GDP and its sectoral
composition, capital formation, development expenditure, growth in population,
level of urbanization, etc, in turn, determine these factors. But the domestic
demand for cement is mainly from the housing activities and infrastructure
development. The government paved the way for the entry of the private sector in
road projects. It has amended the National Highway Act to allow private toll
collection and identified projects, bridges, expressways and big passes for private
construction. The budget gave substantial incentives to private sector construction
companies. Ongoing liberalization will lead to an increase in industrial activities and
infrastructure development. So it is hoped that Indian cement industry shall boom
again in near future.
I n cen t i ve s i n S t a te s
Most state governments, in order to attract investments in their respective states,
offer fiscal incentives in the form of sales tax exemptions/deferrals. In some states,
this applies only to intrastate sales, like Madhya Pradesh and Rajasthan. States like
Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption
from electric duty.
I n s t a l l ed Capac i t y
India is the world’s second largest cement producing country after China. The
industry is characterized by a high degree of fragmentation that has created intense
competitive pressure on price realizations. Spread across the length and breadth of
the country, there are 120 large plants belonging to 56 companies with an installed
capacity of around 135mn tons as on March 2002.
10.OPPORTUNITIES, THREATS, RISKS AND
CONCERNS
The cement industry is going through its boom period with full capacity utilization.
Powered by the GDP growth of 8-9%, the annual demand for cement in the country
continues to grow at 8- 10%. As per NCAER study, under high growth scenario, the
demand for cement (including exports) is expected to increase to 244.82 million
tonnes by 2010-11. As per the study, the demand is expected to be much higher at
311.37 million tonnes, if the optimistic projections of the road and the housing
sectors are met. The industry has responded to this with substantial new capacity
announcements. The materialization of these capacities, however, is likely to be
delayed due to a number of factors including timely delivery of equipment and
construction of the plant due to the heavy order book position of the suppliers. It is
expected that demand growth will outstrip supply till the materialization of such
new capacities. However, the current high level of international crude prices and its
impact on the domestic prices of petroleum products is likely to make a dent in the
profitability but its impact will have to be seen depending upon the ability of the
economy to pass on such cost increase to the consumer.
While the freight cost could be optimized on the imported coal through usage of
company’s own ships for part of the quantity, the international prices of imported
coal and its volatility together with the strengthening of the dollar against rupee
could derail this. This could impact the delivery prices of imported coal and also the
cost of production. The Government has taken steps to increase the availability of
indigenous coal for its expanded capacity across various plants which can mitigate
the impact of such high cost of imported coal for the plants located near the coal
fields in India.
The Government’s continuing efforts to rein in cement prices by freeing imports and
banning exports could artificially disable the normal market price mechanisms for
determining the price.
The rise in the price of cement is because of the gap of demand & supply in the
market. The demand for cement is much higher than its actual supply. But with the
production maximization, which can be encountered in next few year, this gap may
narrow down, that may ensure the market to be in equilibrium.
Decreasing per capita consumption doesn’t affect the total consumption for the
cement. It means the infrastructure; contacted housing is using the bulk of the
production. In spite of High price of the product, the hick of demand because of the
increasing rate of infrastructural development.
Domestic price of cement is rising as well as the imported cement price is lowering.
So altogether the supply of the cement, which is affordable, will increase. This may
in decrease the gap between supply and demand.
Major Demand was from the housing sector, which may shift to infrastructure as lots
of infrastructural development processes has already being taken up & due to the
increased price, housing segment started showing a slowdown.
11.Main Companies In India
As soc i a t ed Cement Compan ie s L td (ACCL )
B i r l a Corpo ra t i on L td .
Birla Corp's product portfolio includes acetylene gas, auto trim parts, casting, cement,
jute goods, yarn, calcium carbide etc. The cement division has an installed capacity of
4.78 million metric tonnes and produced 4.77 million metric tonnes of cement in 2003-
04. The company has two plants in Madhya Pradesh and Rajasthan and one each in
West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent. It
manufactures Ordinary Portland cement (OPC), Portland pozzolana cement, fly ashbased
PPC, Low-alkali Portland cement, Portland slag cement, low heat cement and
sulphate resistant cement. Large quantities of its cement are exported to Nepal and
Bangladesh. Going forward, the company is setting up its captive power plant to remain
cost competitive.
I n d i a Cement s
India Cements is the largest cement producer in southern India with a total capacity of
8.81 million tonnes and plants in Andhra Pradesh and Tamil Nadu. The company has a
market share of 5.4 per cent with a total cement production of 6.36 million tonnes in
2003-04. Its product portfolio includes ordinary Portland cement and blended cement.
The company has limited its business activity to cement, though it has a marginal
exposure to the shipping business. The company plans to reduce its manpower
significantly and exit non-core businesses to turnaround its fortune. It also expects the
export market to open up, with the Gulf emerging as a major importer.
JK Syn the t i c s
JK Synthetics, a Singhania Group company, started manufacturing nylon at Kota in 1962.
Subsequently, it diversified into PSY/PFY, nylon tyre-cord, cement (in 1975), acrylic and
white cement (in 1984). The company has a market share of 2.7 per cent. JK Synthetics
Limited is restructuring its business divisions into two separate entities- JK Cements and
JK Synthetics. After the restructuring, it will be left with a cement plant at Nimbahera in
Rajasthan, with a capacity of 3.26 million metric tonnes and manufacturing white
cement.
Madra s Cement s
Madras Cements Ltd is one of the oldest cement companies in the southern region and
is a part of the Ramco group. The company is engaged in cement, clinker, dolomite, dry
mortar mix, limestone,
ready mix cement (RMC) and units generated from windmills. The company has three
plants in Tamil Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. It
has a total capacity of 5.47 million tonnes annually and holds a market share of 3.1 per
cent. Madras Cements plans to expand by putting up RMC plants. As Karnataka is a
promising market, the company is further expanding its capacity from the present 1.5
million tonnes to 3.4 million tonnes through an investment of US$ 9 million.
Ho l c im
Holcim, earlier known as Holderbank, has a cement production capacity of 141.9 million
tonnes. It is a key player in aggregates, concrete and construction related services. It
has a strong market presence in over 70 countries and is a market leader in South
America and in a number of European and overseas markets. Holcim entered India by
means of a long-term strategic alliance with Gujarat Ambuja Cements Ltd (GACL). The
alliance aims to strengthen their clinker and cement trading activities in South Asia, the
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Report on Cement Industry In India By: Shobhit Chandak
Middle East and the region adjoining the Indian Ocean. Holcim also intends to use India
as an additional base for its IT operations, R&D projects as well as a procurement
sourcing hub to generate additional synergies and value for the group.
I t a l cemen t i Group
The Italecementi group is one of the largest producers and distributors of cement with
60 cement plants, 547 concrete batching units and 155 quarries spread across 19
countries in Europe, Asia, Africa and North America. Italcementi is present in the Indian
markets through a 50:50 joint venture company with Zuari Cements. All initiatives in
southern India are routed through the joint venture company, while Italcementi is free to
buy deals in its individual capacity in northern India. The joint venture company has a
capacity of 3.4 million tonnes and a market share of 2.1 per cent.
La f a r ge I n d i a
Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5
million tonnes and a clinker capacity of 3 million tonnes in the country. Lafarge
commenced operations in 1999 and currently has a market share of 3.4 per cent. It
exports clinker and cement to Bangladesh and Nepal. It produces Portland slag cement,
ordinary Portland cement and Portland pozzolana cement. The Indian cement plants are
located in Chhattisgarh and Rajasthan. Lafarge Cement has become the largest cement
selling firm in the Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.
12.Issues concerning Cement Industry
• High Transportation Cost is affecting the competitiveness of the cement industry. Freight accounts for 17% of the
production cost. Road is the preferred mode for transportation for distances less than 250km. However, industry
is heavily dependant on roads for longer distances too as the railway infrastructure is not adequate.
• Cement industry is highly capital intensive industry and nearly 55-60% of the inputs are controlled by the
government.
• There is regional imbalance in the distribution of cement industry. Limestone availability in pockets has led to
uneven capacity additions.
• Coal availability and quality is also affecting the production.
13.Ranking
14.Outlook
Outlook for the cement industry looks quite bright. Given the sustained growth in the real estate sector, the government's
emphasis on infrastructure and increased global demand, it looks as if the juggernaut of cement industry would continue
to roll on the path of growth.