Cement players who will showcase their abilities to go green will have the advantage in the long term - both in operational efficiencies as well as stock valuations, says Vaibhav Agarwal of PhillipCapital.
We attended a two-day conference organised by the INDIAN CEMENT REVIEW in Mumbai to discuss future opportunities and the way ahead. The agenda was to discuss the implications of infrastructure development on cement demand, space for opportunities such as composite cement, and most importantly, how the industry can reduce its carbon footprint. The conference was followed by an awards ceremony where leading personalities and companies were felicitated for their contribution to the sector.
Dalmia Bharat, JK Cement, JK Lakshmi Cement, Deccan Cement and NCL Industries were some of the corporate awardees and Lifetime Achievement Awards were presented to MH Dalmia (OCL), Yadupati Singhania (JK Cement), PR Ramasubrahmaneya Rajha (Ramco Cement) and Umesh Shrivastava (Holtec Consulting).
The key takeaways are:
A step forward to convert itself to a SMART manufacturing sector, making the sector Sustainable, Measurable, Agile, Responsible, and technology-oriented, was the key agenda.
Conserving natural resources such as limestone, coal, minerals and lowering the carbon footprint was the underlying theme.
Consolidation will continue and entry barriers are now very strong.
It was emphasised that every manufacturer needs to identify its competitive edge for survival. Players who are able to differentiate themselves on operating parameters will be the new leaders in the industry.
Many newcomers may find it difficult to establish their mark and will be the eventual targets.
Composite cement is the next new thing
Composite cement means manufacturing cement through a mix of clinker (35-65 per cent), slag (20-50 per cent), and fly ash (15-35 per cent). With lower clinker factor, this will mean significant reduction in thermal energy consumption, lower carbon emissions, as well as preservation of natural resources. Research on this subject conducted by the industry showcases that the limestone requirement can come down to 0.60x per tonne of clinker (vs 1.43x currently for OPC) and carbon emission and energy consumption parameters can be lower by 58 per cent.
However, given that slag is not widely available across all parts of the country, adaptability of this new product by the industry is debatable.
Industry focus is utilisation ramp-up
None of the manufacturers present talked of capacity expansions. Even the newcomers present were cautious about giving guidance on capex. All understood that sufficient capacity is available in the sector and the immediate focus is only utilisation ramp-up with a firm and stable pricing environment.
Companies that are innovative and focused on efficiency improvement will have the advantage over players who lack these skill-sets (Dalmia Bharat leads the pack here).
Industry is cautious about overcapacity and no material incremental capex announcements will be made before the end of FY18.
Going green is the next big agenda for the industry and players who will showcase these abilities will have the advantage in the long term - both in operational efficiencies as well as stock valuations.
We understand that Dalmia Bharat is an industry leader in such green initiatives in the sector. Some of its internal targets give us the confidence that this thrust will prevail at Dalmia Bharat.
They include: (a) to be water positive in every plant by 2017; (b) 0.515 tonne of target carbon emission (0.526 currently, 0.66 industry) and (c) to rely on only renewable energy by 2030.