Displaying items by tag: Gujarat

The National Council for Cement and Building Materials (NCB) International Seminar is running this week in New Delhi and this gives us a good opportunity to take a snapshot at the world’s second largest cement industry.

Data from the Ministry of Commerce & Industry shows comfortable cement production growth of 4.4% year-on-year to 255Mt in the first nine months of 2019. As graph 1 shows there was higher production growth in 2018 but this followed a decline in 2017, due to partly to the government’s demonetisation policy. October 2019 confirms a trend of falling year-on-year growth from August 2019 onwards following a peak growth rate in mid-2017.

Graph 1: Indian cement production in the first nine months of the year, 2015 – 2019. Source: Indian Ministry of Commerce & Industry.

Graph 2: Year-on-year change in monthly Indian cement production, 2017 – October 2019. Source: Indian Ministry of Commerce & Industry.

Analysts like ICRA have blamed the growth slowdown on the general election in mid-2019 and then the monsoon rains. By region in the six months from April to September 2019 it noted a slowdown in demand due to slowing government projects in northern, eastern and central areas. Labour concerns were reported in the north, centre and Gujarat in the west. Raw material shortages were picked up on such as water in Maharashtra and sand in the east and Andhra Pradesh. Positive growth was reported in Kerala, driven by post-flood reconstruction and low-cost housing schemes, and in Karnataka due to general construction activity. Broadly, UltraTech Cement, the country’s largest cement producer, in its November 2019 investor’s presentation, agreed with this assessment. It noted growth in the northern region and declines elsewhere. Like ICRA it too picked up on low cost housing declaring it to be a ‘key cement consumption driver.’

Away from the figures the main news stories have been continued consolidation such as the auction for Emami Cement and UltraTech Cement’s acquisition of Century Textiles and Industries. The sale of the former for plants in east and central regions has been linked to all the major local producers, including those owned by LafargeHolcim and HeidelbergCement. A report in the Hindu newspaper last week quoted a source placing UltraTech Cement and Nirma Group as the frontrunners with a valuation of around US$700m and an announcement at some point in December 2019. Despite UltraTech Cement’s market dominance nationally, its 17% production share in the east is low compared to its presence elsewhere. Nirma Group’s subsidiary Nuvoco Vistas is one of the smaller producers but, notably, it picked up Lafarge India’s assets in 2016.

Investment in new production capacity has continued with announcements from both JSW Cement and HeidelbergCement in recent weeks about expansion plans well into the mid-2020s. This follows planned projects from Dalmia Bharat Cement and Ramco Cement as well as orders from the JK Cement and Shree Cement. This ties into the capacity growth forecasts of around 120Mt over a similar timescale that the analysts were predicting in the middle of 2019. JM Financial, for example, pinned most of this growth on the south followed by the east and north. However, The India Cements said in November 2019 that it was delaying its expansion projects in Uttar Pradesh due to slowing government spending.

As is usual for a country with a low per capita cement consumption, on the national scale, one of the tensions in the Indian cement industry has been the balance between the capacity utilisation rate and the commissioning of new capacity. Its utilisation rate was below 60% in 2018 and a number of producers started reporting the negative effects of higher input and raw materials costs on their financial results. Knowing when to stop and start capacity growth is critical in this kind of environment. Specifically in India’s case curveballs such as government action on pollution and the country’s growing need for imports of coal as well as a burgeoning waste fuels sector are factors to keep an eye on. Finally, general trends such as UltraTech Cement’s focus on the Indian market, despite buying assets outside the country, are also compelling to watch as it chooses to concentrate on just one country. There are parallels here with other similarly-sized multinational that have also been focusing on core markets elsewhere in the globe.

There was a glimmer of good news visible through the Delhi smog this week with the launch of a market-based emissions trading scheme (ETS) for particulate matter (PM). A pilot has started at Surat in Gujarat. The scheme will apply to 350 industries in the locality and it will be scrutinised for wider rollout in the country.

China robustly started to tackle its industrial PM emitters a few years ago although the work remains on-going. In its wake India has increasingly made the wrong sort of headlines with horrifically high dust emissions. Delhi, for example, reportedly had PM2.5 emissions of over 440µg/m³ in January 2019. To give this some context, the World Health Organisation’s (WHO) annual upper guideline figure for safe human exposure is 10µg/m³. Research by the Financial Times newspaper suggested that more than 40% of the Indian population is subject to annual PM2.5 emissions of over 50µg/m³.

Air Quality Life Index (AQLI) research reckons that if India were able to meet its national PM2.5 standard of 40µg/m³ then its population would live 1.8 years longer or 4.3 years longer if it met the WHO guideline level. The current situation is an unnecessary tragedy. In strictly structural terms the country’s productivity is being thrown away by damaging the health of its workforce. For comparison amongst other major cement producing countries, AQLI data placed China’s PM2.5 emissions at 39µg/m³, Indonesia at 22µg/m³, Vietnam at 20µg/m³ the US at 9µg/m³. These figures cover all industries in different conditions and climates. If the US can do it, why not the others?

Back on trading schemes, the famous ETS at the moment is the European one for CO₂ emissions. Similar schemes are slowly appearing around the world as governments look at what the European Union (EU) did right and wrong. For example, South Africa started up a carbon tax in early June 2019. Yet as the supporting documents by the Gujarat Pollution Control Board (GPCB) point out there have been a variety of ETS systems’ over the years. The US’s Acid Rain Program is generally seen to have achieved significant reductions in SO2 and NOx emissions although the National Emission Standards for Hazardous Air Pollutants (NESHAP) has continued this work. Chile even ran its own PM ETS in the 1990s although the outcomes have been disputed.

One problem with a CO₂ ETS, and anthropomorphic or man-made climate change in general, is that it is intangible. Even if sea levels deluge major coastal cities, rising mean temperatures reduce agricultural yields and human populations contract sharply, people will still be arguing over the research and the causes. The beauty of a PM ETS is that if it works you can literally see and feel the results. A famous example here is the UK’s Clean Air Act in the 1950s that banished the fog/smog that London used to be famous for.

The Gujarat PM ETS is a pilot, the results of which will be considered by researchers from a number of US-based universities and the Abdul Latif Jameel Poverty Action Lab. Explicitly, the study plans to use a randomised control trial to compares its results against the command and control style approach used in the rest of the country. On the cement-side various Indian news stories have emerged as state pollution boards have increasingly started fining producers for emission limit breaches. Clearly the government is taking dust emissions seriously. Reduction is long overdue.

India: The state of Gujarat has launched a market-based cap-and-trade system in particulate matter to reduce air pollution. It says it is the first such initiative in the world. The project is being piloted in Surat with the aim to expanding it nationally subsequently.

“With this program, we are kicking off a new era of cleaner production, while lowering industry compliance costs and rewarding plants that cut pollution in low-cost ways,” said Rajiv Kumar Gupta IAS, chairman of the Gujarat Pollution Control Board (GPCB). The GPCB is carrying out the emissions trading program with the help of a team of researchers from the Energy Policy Institute at the University of Chicago (EPIC), the Evidence for Policy Design at Harvard Kennedy School, the Economic Growth Center at Yale University and the Abdul Latif Jameel Poverty Action Lab. The researchers are evaluating the program’s benefits and costs, relative to the status quo, using a randomised controlled trial.

The emissions trading program builds on work by the GPCB in using continuous emissions monitoring systems to track industry emissions in real time. About 350 industries around Surat have installed continuous emissions monitoring systems and now transmit real-time emissions data. The new scheme takes advantage of this technology for its monitoring.

India: Accusations of violence by local police against activists protesting against a limestone mining lease granted to UltraTech Cement in Gujarat have been referred to the Criminal Investigation Department (CID). Police from Bhavnagar allegedly attacked protestors with batons and used tear without prior provocation during a march in early January 2019, according to the DNA India newspaper. The protestors were complaining about a mining lease for a quarry in the Talaja district.

India: JK Cement has invested nearly US$65m towards building two new grinding plants at Balasinor in Gujarat and Aligarh in Uttar Pradesh. The Balasinor plant will have a production capacity of 0.7Mt/yr, according to the United News of India. It will cost US$35m to build. The Aligarh plant will have an investment of US$30m.

India: Adani Group plans to build an integrated cement plant at Lakhpat in Gujarat as part of a US$7.7bn investment in multiple projects in the state. Other projects include the world’s largest solar park and a lithium battery plant, according to the Press Trust of India. Adani Group is an integrated infrastructure conglomerate with interests in resources, logistics, energy, agriculture, real estate, public transport infrastructure, consumer finance and defence sectors.

India: Sanghi Industries has signed a memorandum of interest with the Gujarat state government to expand its Kutch cement plant. It plans to invest around US$213m on the project, according to the Times of Indian newspaper. The plant will be expanded to a cement production capacity of 8.6t/yr from 4Mt/yr. The project is scheduled for completion by 2020 and it will create 350 new jobs.

India: JSW Cement is planning to target the north and north-east of the country after a proposed initial public offering (IPO) in 2020. The company is looking for acquisitions in the region to meet its production capacity target of 20Mt/yr by 2020, according to a company executive quoted by the Economic Times newspaper. The cement producer has purchased two limestone mines via auction at Nagaur in Rajasthan and one in Gujarat. It is also considering building new cement plants near the mines. The company has a production capacity is 12.8Mt/yr at present.

India: Oman’s Raysut Cement plans to invest around US$700m in India by 2022. Joey Ghose, the chief executive officer (CEO) of the company, said that about US$200m has been set aside to buy majority stakes in two local producers in early 2019, according to the Hindu newspaper. Raysut Cement wants to increase its total cement production capacity to 20Mt/yr. The investment will be funded by internal revenue and loans.

The cement producer is holding talks with companies in Chhattisgarh and the coastal region of Gujarat respectively. Each company has a production capacity of around 1.2Mt/yr. Raysut Cement also intends to invest up to US$500m in these companies following their acquisition by 2022, bringing their capacity up to 5Mt/yr.

Outside of India, Raysut Cement also says it is interested in buying a 70% stake in Kenya’s ARM Cement for US$100m. It is also in discussions to acquire buy cement producers in Uganda and Djibouti. It currently has projects in development in Somaliland and Somalia. The company also holds a majority stake in Pioneer Cement Industries Georgia.

India: The Ministry of Environment, Forest and Climate Change has awarded terms of reference for Shree Cement's proposed plant at Bhuj in Gujarat. The proposed 3.5Mt/yr integrated plant project will include a waste heat recovery unit, a captive power plant, a synthetic gypsum unit and a railway terminal. The unit will be built near Maldo, Lakhpat tehsil in Kachchh district. Limestone for the plant will come from a quarry adjacent to the proposed site.