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This week brought the news that, following testing by the Food Safety and Standards Authority of India (FSSAI), some 27,402t or US$49.8m of Nestlé's Maggi noodles had to be recalled from the market due to allegedly high levels of lead. But what do you do with 27,402t of noodles deemed unsafe for human consumption?
The solution was incineration. Five cement plants will take 40 days, which started on 9 June 2015, to consume all of the noodles as an alternative fuel. "This was the most environment-friendly solution to destroy the recalled noodles," said Luca Fichera, executive vice president of Nestlé's supply chain in India.
India's fuel supply is notoriously unreliable. Coal is the dominant fuel used for cement and power production in India, however, supplies have been inconstant in terms of both quality and quantity for some time now. To shore up the coal supply, the government cancelled, reallocated and auctioned 214 of the 218 coal blocks in India, starting in September 2014. According to local media, Coal India, which still operates most of the blocks, is now expected to increase its coal production capacity by as much as 60Mt in 2015, following 7% production growth in the 2014 - 2015 financial year. However, there is still a major coal shortage in the country and recent reports by India's coal ministry suggest that the new coal linkages will increase coal costs. The new coal linkage process will see sales go via an auction system instead of a static price. Coal costs for cement producers are expected to rise by as much as 25% as a result.
Given India's long-standing fuel supply problems, its cement producers may wish to learn from the use of Nestlé's Maggi noodles as alternative fuels in cement plants. Instead of viewing the coal shortage as a challenge, it might instead be considered an opportunity to increase alternative fuel use, reducing costs and moving to more environmentally-friendly cement production. In addition to the standard industrial, municipal and household waste, among others, India might look to use some of the large quantities of waste biomass that must surely be produced from its agricultural sector. Like the game, 'Hungry, hungry hippos,' India's cement plants could consume a wide variety of nearby wastes in place of coal.
Anhui Conch to invest US$35.4m in joint venture 16 June 2015
China: According to Reuters, Anhui Conch's board has agreed to invest US$35.4m to set up a joint venture to acquire Shengta Group's cement-related assets.
US$49.8m of Nestlé’s ‘Maggi’ noodles recalled and recycled as alternative fuel for cement plants 16 June 2015
India: Some US$49.8m, which equates to 27,420t, of Nestlé's Maggi noodles has been recalled in India and is now being used as an alternative fuel at five Indian cement plants. Nestlé said that the recall process is one of the largest in the history of India's food industry.
"The recall of Maggi noodles from the market is an immensely complex mammoth activity, the largest in the history of Nestlé," said Luca Fichera, executive vice president of the supply chain in India. "The trust of our consumers is extremely important for us and despite the enormity, we are focused on completing this efficiently and as fast as feasible."
The recall started on 5 June 2015. Of the total to be consumed by cement plants, some US$32.7m was recalled from the market, while US$17.1m was removed from Nestlé's factories and distribution centres.
The Indian cement plants have been consuming the noodles as alternative fuels since 9 June 2015. "This was the most environment-friendly solution to destroy the recalled noodles: To convert them into fuel," said Fichera. It will take 40 days to destroy the 27,420t of noodles at the five cement plants.
The food safety regulator ordered Nestlé to withdraw the noodles after some samples were allegedly found to contain higher-than-permissible levels of lead. This was rejected by Nestlé, which said that its own independent tests suggested otherwise. Nestlé has since moved to the Bombay High Court, challenging the order. The court has issued notice to the Food Safety and Standards Authority of India (FSSAI), the regulator and other respondents and posted the matter for hearing on 30 June 2015. Nestlé has halted the production of Maggi noodles in its factories since 5 June 2015 and has withdrawn the product from the market.
Sri Lanka: Dalmia Cement (Bharat) Limited is increasing its exports to Sri Lanka through its channel partner M/s Smart Dragon Lanka Pvt Limited. With a total capacity of 20Mt/yr, Dalmia Cement has cement plants in southern and eastern India, making it a prominent manufacturer of cement in India.
Dalmia Cement currently supplies cement to the Sri Lankan market from its 3.5Mt/yr plant in Dalmiapuram, Trichy, Tamil Nadu. The plant has 21 silos, making it convenient to store many varieties of cement. It can also supply Sri Lanka from its 2.5Mt/yr plant in Kadappa, Andhra Pradesh. The plants use the ports of Tuticorin and Chennai in Tamil Nadu and the port of Krishnapatnam in Andhra Pradesh.
"Dalmia Cement has been exporting cement to Sri Lanka since 2009. We wish to strengthen our bond and relationship with Sri Lanka by providing superior-quality cement, with a vision of becoming one of the leading exporters of cement to the country within the next three years," said R Sanjay, assistant executive director of institutional sales at Dalmia Cement.
Cement sales extend declines in May 2015 15 June 2015
Indonesia: Cement consumption fell by nearly 4% year-on-year during the first five months of 2015, the biggest decline in the January - May period in the last six years. The fall has been blamed on the country's slowing economy.
Data released by the Indonesian Cement Association show that cement demand in January - May 2015 fell by 3.8% year-on-year to 22.9Mt. It was the steepest drop so far in 2015. Consumption has declined consistently since February 2015. It was also the biggest drop recorded since 2009, when domestic demand fell by nearly 7% year-on-year due.
Indonesia's economy grew by 4.7% in the first quarter of 2015, the slowest in six years and since the start of the global financial crisis. Cement consumption has been a parameter in emerging markets' economic growth. "Cement demand has not fully recovered yet due to slower economic growth, relatively high interest rates, changes in property regulations and bleak commodity exports, which hampered property demand and consequently reduced cement consumption," said Marwan Halim from the stockbroking arm of United Overseas Bank Ltd, UOB KayHian, in a report. Bank Indonesia has maintained its interest rate at 7.5% to curb inflation and maintain its currency, while mortgage regulation and a lower price threshold for property products subject to 20% income have contributed to constraining the property industry.
Cement consumption in May 2015 fell by 7.9% year-on-year, much steeper than the 1.1% decline recorded in April 2015. It was the biggest May drop recorded since May 2009. Lower sales in May 2015 occurred in almost every part of the country, although East Nusa Tenggara and West Nusa Tenggara Provinces saw monthly sales rise by nearly 50% year-on-year. Commodity-based provinces experienced the highest declines during the month, with South Kalimantan and East Kalimantan making the steepest plunges with 41% and 24%, respectively. Even West Java, which traditionally has one of the highest cement consumption rates in Indonesia, suffered a sales decline of 8.3% year-on-year in May 2015.