The great logistics opportunity
The domestic cement industry has already reached the best of operating parameters, and there is very little scope to improve efficiencies to reduce cost. One of the options available is to reduce distribution cost. Further, fierce competition in the crowded marketplace keeps pushing managements to find effective ways to lower costs.
Logistics is a key cost differentiator, and the cement company that can master the art of delivering cement at the lowest cost will be the winner in the market. Cement transportation by water throws up many opportunities. For more details, refer to the elaborate interview of industry veteran Sumit Banerjee elsewhere in this issue.
As the commodity cost of cement is quite low, the transportation cost is a key factor in competitively supplying customers with cement. Waterborne transportation has remarkably lower costs than rail or road transportation, but substantial infrastructure is required to load and unload ships. The cost is dependent on distance, ship size and several other factors, but the most important parameter is the market condition on the required trading route.
Inward logistics includes coal and limestone transportation, while outward logistics is mostly the final product, cement. Some companies also incur outbound logistics cost of transporting clinker to their grinding plants.
The Indian cement industry is the second largest in the world after China, with a total capacity of close to 350 MT and plays a major role in the development of the nation. Therefore, considering the role of the industry in the economy´s development, it is necessary to incentivise bulk transportation and thereby optimise cost, save fuel and reduce carbon emission, while ensuring safe carriage.
General cargo ships are also available in a wide range of type and sizes. For distribution on inland waterways, there are barges or small self-propelled ships in ranges from 200 to 2,500 tonnes. For cement transport in coastal regions, ships between 1,000 and 7,000 tonne cargo capacity are available.
On the other hand, there is no mechanisation process in India, in spite of the wishes of the industry. Here the government has to play an active role. Industry on its own cannot make mechanisation happen. It should be a collaborative effort. In the short run, mechanisation will create disturbance, but in the long run, every stakeholder will be befitted. People need to be educated and prepared to face these short-term disturbances. Mechanisation can alone reduce cost by a minimum of 10 per cent. Cement producers currently evacuate around 3,000 tonnes by the manual route from railway/goods sheds, just because systems are not mechanised. In today´s context, labour is already becoming a scare commodity, so the industry should be prepared for such an eventuality in 2018-2020. Transporting cement by the sea route will easily provide a window for mechanisation.
Cement transportation through water can be done using either general cargo ships (ships that are suitable to handle all kinds of bulk cargo) or specialist ships that only carry cement and have their own loading and unloading equipment. Dispatching bagged cement is relatively easier compared to loose cement. The specialist ships to carry loose cement are called cement carriers, and are available in a large range of sizes and types (see Rama Murthy Nety´s interview for more details).
Transporting cement through such ships is already a popular concept. Self-discharging cement carriers (small inland barges) can support cargo capacity of 300 tonnes. The largest self-discharging cement carriers have a cargo capacity of 40,000 tonnes. There are many companies like KGJ Cement and BIMCO Cement Carriers, and a number of others on the international scene, who are specialists in cement transport.
Pneumatic self-unloading vessels are built specifically to handle powder cargoes such as cement. Using lean-phase or dense-phase pneumatic conveying systems, they operate using compressed air to move the cargo through piping to load and unload. Both the loading and unloading processes are completely enclosed, and this type of vessel is expected to operate completely in a dust-free environment. From an environmental standpoint, this is one of the most effective methods of transporting cement by sea.
The pneumatic conveying technology on the ship is matched with the systems on shore to account for pipeline restrictions and high volumes of air. This ensures optimum loading and discharging rates - typically 1,500 t/hr.
Handling and Transporting Cement
The cargo holds of the pneumatic self-unloaders have sloping bottom surfaces fitted with air slides. Cement powder is fluidised when compressed air is injected into the air slides below the cargo, and the sloping surfaces of the cargo hold move the cement toward the center tunnel for discharging.
Rotary valves and cement screws in the tunnel inject the cement into the discharge piping where high volumes of transport air move the cement and carry it in suspension through the discharge pipelines to a storage silo ashore. The same pipelines are used to load the vessel through a single point. Distribution pipes on the vessel direct the cement powder into the hold to be loaded, and large dust collectors are used to evacuate the transported air from the holds, and filter out the dust. The instrumentation and use of IT finds its way in handling ship fleets. The systems are today equipped with remote diagnostics, which engineers based on land can access. General bulk carriers are very suitable for retrofitting cement-handling equipment and any size of second hand bulk carrier can quickly and easily be converted into a self-loading and unloading cement carrier at a much lower overall cost than a new ship.
Today, 70 per cent of the cement movement worldwide is by sea compared to just 1-2 per cent in India. However, the scenario is changing with most of the big players like UltraTech, Ambuja and Sanghi having set up their bulk terminals.
Currently, around 60 per cent of cement in India is transported using roads - the costliest of the transportation modes at around Rs 1.5 per tonne per kilometre.
For every 50-kg bag of cement, the logistics cost comes to around Rs 18-25 by road and Rs 12-15 by railway, depending on the distance. For example, the country´s third-largest cement maker, Ambuja Cements, has opted for sea-routes to transport its cement from Gujarat to the southern market.
In India, the credit of using the sea route for transporting cement/clinker can be given to the Chowgules of erstwhile Narmada Cement, which set up the country´s first split location plant. Later on, Ambuja Cements, which had a coast-based plant, started using the sea route to feed the Mumbai market, and has very effectively created a dominant space in the western market - especially in and around the state capital.
The full credit has to be given to Narotam Sekhsaria for his vision. Today Ambuja does not have any plant in the southern region, yet it is supplying material to those markets only because it uses the sea route. Now, Ambuja Cements, as a part of cement giant LafargeHolcim, is expected to do much better and find different ways of using water routes for transporting cement. LafargeHolcim has been using the sea route in other places of the world, and is well suited to this operation, compared to other local players. Not to be left behind, UltraTech has also exploited the sea to transport cement after taking over L&T´s cement business.
Today, the water route is being used by mainly Ambuja, UltraTech and Sanghi Cement. Sanghi is a smaller volume player compared to the other two, but it has very ambitious plans for moving cement by sea. With its cement production running smoothly, the company has plans to improve its distribution side through more focus on logistics, with more investment on coastal movement for domestic as well as foreign markets. In fact, Sanghi has started moving its cement through coastal shipping. Earlier, it had major plans to export cement to neighbouring countries, but this business route is not lucrative any more, thanks to the plunging global prices of cement.
Sanghi Cement has the distinction of being the only cement company to receive an Export House status in the first eight months of commencement of operations. Another experiment carried out by Cochin Port Trust is worth mentioning. The surplus land with the port trust has been leased out to cement companies to set up bulk cement terminals.
In conclusion, a solution for Europe will not be suitable for Indonesia, a solution for the UK will not be an ideal solution for Bangladesh, and a solution for the USA will not be feasible for India. We need to find our own solutions to reduce the logistics cost of cement, either through waterways or rail.