Displaying items by tag: Power Plant

Fuels procurement and costs have been weighing on the minds of Indian cement producers since the start of the Russian invasion of Ukraine in February 2022. Two news stories this week show some of this. The first concerns recent imports of petcoke from Venezuela. The second covers the closure of captive power plants due to domestic shortages of coal.

At the same time, as the financial results for cement companies for the first quarter of the Indian 2023 financial year have been released, one constant has been hefty hikes in power and fuel costs. Graph 1 below gives a rough idea of the jump in costs major producers have been contending with. One point to note is that, possibly, the larger cement companies may have been better at slowing down the cost inflation from fuel. However, the prevalence of waste heat recovery installations and alternative fuels usage may also be a factor here. Finally, the company approved to buy Ambuja Cement and ACC, Adani Group, also runs India’s biggest coal trader. It will be interesting to see in the medium term how this might affect the fuel costs for its new cement division.

Graph 1: Comparison of Power & Fuel costs for selected Indian cement producers in first quarter of 2022 and 2023 financial years. Source: Company financial reports.

The Venezuelan story demonstrates the greater lengths that Indian cement producers are now going to secure fuel supplies. Reuters reports that cement companies imported at least 160,000t of petcoke from the South American country between April and June 2022 and that more was on the way. JSW Cement, Ramco Cements and Orient Cement are among them. The Venezuelan oil industry has been under US economic sanctions since 2019 but byproducts such as petcoke are not covered by this. Its petcoke has apparently been discounted by 5 - 10% below the price of US alternatives.

Indian cement producers have been prepared to risk US sanctions further by importing coal from Russia. The Business Standard newspaper, using data from Coalmint, reported that Russia became India’s third largest source of coal imports, at 2.06Mt, in July 2022. Before the war it was the sixth-largest source of coal to the country. Again, Reuters covered how cement companies were doing this in July 2022, when it revealed that UltraTech Cement had used India-based HDFC Bank to purchase coal using Chinese Renminbi, not the US Dollar as is more common for international purchases of commodities. In a conference call for the release of its first quarter results, UltraTech Cement’s chief financial officer Atul Daga confirmed the purchase and described it as “opportunistic.” He added that, “If something more surfaces, we will pick it up.” As the data for July 2022 shows, it may or may not be UltraTech Cement that is buying Russian coal right now but other parties in India certainly are.

Some of the wider economic implications about India buying Russian coal in the face of US and European sanctions include whether any retaliation might be forthcoming and a general sign that the dominance of the US Dollar as the world’s reserve currency is not guaranteed. The former seems doubtful given the size of India’s markets. Yet if the sanctions against Russia drag on then a shift in the global economic status quo becomes more likely, especially if opportunistic purchases become regular ones.

The situation facing captive power plants illustrates one more turn of the screw on energy costs for industrial manufacturers. 30% of captive power plants in India are reportedly closed due to the high cost of coal or an inability to even import it. Although it is worth noting that it is unclear whether, proportionally, more or less of these are serving cement plants. As N Srinivasan, the vice-chairman and managing director of India Cements told the Business Standard newspaper, “Most of our plants have coal based captive power generation. The cost of captive generation is now more than the grid cost. Hence, we shut down all captive power units and resorted to grid power.”

The International Energy Agency (IEA) forecast in July 2022 that Indian coal demand would grow by 3% year-on-year to 1.16Bnt in 2023 due to expanded electrification and economic growth. In its view, global coal demand will be driven principally by China but also by India to a lesser extent. However, unhelpfully, it added that uncertainty was also rising with ongoing developments in the war in Ukraine having a prominent effect. This is unlikely to assist Indian cement producers and their fuel buyers who will be asking themselves: how long will the current situation last and can the prices be passed on to consumers? There is one small silver lining in the current group of economic storm clouds hanging over cement producers at least. The second quarter of the Indian financial year is monsoon season, when economic activity slows down. It won’t slow the trend down but it may reduce the fuel bill a little.

India: 30% of plants in India’s 78GW captive power plant network have temporarily closed due to high coal prices. 40GW-worth of capacity (55%) is coal-fired, with an annual consumption of 200Mt/yr. The Business Standard newspaper has reported that total Indian coal imports fell by 10% to 23.8Mt in July 2021 from 26.3Mt in June 2021. Deliveries of coal to non-power sector consumers fell by 33% year-on-year at the beginning of August 2021. The Indian Cement Manufacturers Association (CMA) and nine other national industry associations have contacted the government to urge the formation of policies for the equitable distribution of available coal.

India Cements has imported two shipments of Russian coal for use in cement production. The company’s power and fuel costs rose by 54% year-on-year in the first quarter of its 2023 financial year, which began on 1 April 2022. Its vice-chair and managing director Narayanaswami Srinivasan said “Most of our plants have coal-based captive power generation. The cost of captive generation is now more than the grid cost. Hence, we shut down all captive power units and resorted to grid power.”

Australia: Hallett Group plans to establish a slag cement grinding plant in Port Augusta, South Australia. Magnet News has reported the cost of the project as US$83.9m, towards which the producer has received US$13.4m in government funding. The plant will produce cement using South Australian ground granulated blast furnace slag (GGBFS) from Nyrstar’s Port Pirie and Liberty Primary Steel’s Whyalla steel refineries and fly ash from the site of the former Port Augusta power plant. Its operations will be 100% renewably powered. An accompanying new distribution facility at Port Adelaide will ship the cement to markets. The project will create 50 new jobs.

When the Port Augusta grinding plant becomes operational in 2023, its products will reduce regional CO₂ emissions by 300,000t/yr, subsequently rising to 1Mt/yr, according to the company’s expansion plans.

Hallett Group chief executive officer Kane Salisbury said "We're talking about 1% of the entire country's 2030 [CO₂ reduction] commitment, delivered through this project." Salisbury added "We're looking at turning South Australia into a global leader in manufacturing green cement."

India: State-owned coal supplier Coal India has recorded a 17% year-on-year decline in deliveries of coal to cement plants in May 2022. Its coal supply to captive power plants also dropped in the month, by 40% year-on-year.

Coal India is the leading coal mining company globally. Its main customers are energy, cement and steel companies.

Pakistan: Lucky Cement plans to install a 34MW solar power plant at its Pezu power plant in Khyber Pakhtunkhwa. The Balochistan Times newspaper has reported that the 48GWh/yr installation will be equipped with a 5.59MWh Reflex energy storage system. Both the power plant and energy system will be the country’s largest when commissioned. Fossil fuel generation will remain online, but be shut down in the daytime, saving 26,600t/yr of CO₂ emissions.

India: RCCPL, a subsidiary of Birla Corporation, has commenced cement despatches from its 2.7M/yr Mukutban cement plant in Maharashtra. The plant has a further grinding capacity of 1.2Mt/yr and a 40MW captive power plant. Switzerland-based ABB previously delivered electrification and automation systems to the site of the new plant in June 2020.

Canada: Lafarge Canada is supplying its ECOPact reduced-CO₂ concrete to contractor PCL for its construction of the upcoming Genesee power plant in Alberta.

Lafarge North America president and general manager Prez Skiba said "The original concrete proposed was already a low carbon design, but we knew we could take it further. We brought in further emissions reductions with our ECOPact design, and we were able to reduce embodied CO₂ by an additional 20%. That's 20% over and above the original design, which already offered a 20% reduction. The combined 36% CO₂ reduction is equivalent to the energy used by 70 houses in a year."

India: Ramco Cements plans to commission a new 2.5Mt/yr clinker production line at its new plant near Kurnool, Andhra Pradesh in February 2022. A 1Mt/yr grinding unit, 12MW waste heat recovery system and 18MW captive power unit at the plant are expected to be commissioned in the 2022 – 2023 financial year, which starts in April 2022.

The cement producer also intends to commission at upgrade to its Nagar cement plant in the 2023 – 2024 financial year. The US$63m project includes installing a new 300t/day kiln at the plant in Tamil Nadu.

India: Birla Corporation has started the kiln at its new 3.9Mt/yr Mukutban cement plant at Nagpur in Maharashtra. The project had an investment of around US$370m and the plant will be run by subsidiary RCCPL. Birla Corporation said that the new plant is the group’s fourth integrated plant and the biggest single cement production line in Maharashtra by capacity. It will be powered by two 20MW captive power plants that use air-cooled condenser technology to reduce water consumption by 90%. The plant was partly built using the group’s MP Birla Cement Perfect Plus product, a Portland Pozzolana Cement, composed of 30 - 35% fly ash, itself a by-product of thermal power plants. Use of fly ash and slag will be scaled up at the site as production ramps up.

“It is no mean feat to complete such a large project under such challenging circumstances with major disruptions on account of Covid-19 which led to several logistical challenges, stoppage of work and a flight of labour from the project site on several occasions,” said Harsh V Lodha, the chair of Birla Group. “Moreover, to achieve 10m man hours of construction with zero accidents and completion of the entire project without a single major accident or fatality, I am told, is a unique achievement in the cement industry.”

Montenegro: State-owned energy supplier Elektroprivreda Crne Gore (EPCG) has proposed the gradual shutdown of its Pljevlja coal-fired plant and its replacement with a new cement plant. The company said that such a plant would eliminate Montenegro’s 750,000 – 800,000t/yr of cement imports.

The first stage of the Pljevlja power plant’s shutdown will only commence once a replacement power facility is online. Currently, the plant supplies 40% of the country’s energy. Its closure is part of Montenegro’s plan to accede to the EU as soon as 2025.