INDIAN CEMENT INDUSTRY GROWTH STATUS: OPPORTUNITIES AND CHALLENGES

INFRASTRUCTURE GROWTH NEEDS IN A DEVELOPING ECONOMY

. Infrastructure Growth is the milestone for Measuring

GREEN CEMENTECH 2010

13th & 14th May 2010

Dr. S.P. Ghosh

Advisor (Technical)
Cement Manufacturers Association
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Development Growth of a Country. in India Demands Creation or Facilitation of Water and Power Supply, Roads, Housing, Railways to meet the escalating demands of supply chain for food, shelter, communication. . The three main pillars for harnessing rapid infrastructure build-up are Growth in : (a) Skilled and Qualified Manpower; (b) Steel (c) Cement.
. Infrastructure

TOP 10 STEEL AND CEMENT PRODUCING COUNTRIES OF THE WORLD

Sl. Steel* Cement#

OPPORTUNITIES
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No. Country 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. China Japan USA Russia S. Korea Ger many Ukraine Brazil India Italy France Turkey

2004 Prodn. (Mi l.T) 280.48 112.71 99.68 65.68 47.52 46.37 38.73 32.90 32.62 28.60 20.77 20.47 Country China Japan USA Russia India S. Korea Ger many Ukraine Brazil Italy Turkey Spain

2008 Prodn. (Mi l.T) 502.01 118.73 91.49 68.51 55.05 53.48 45.83 37.10 33.71 30.47 26.41 19.04 Country China India USA Japan S. Korea Spain Russia Italy Indonesia Thailand Brazil Ger many

2004 Prodn. (Mi l.T) 933.69 131.07 97.43 72.40 55.80 46.60 46.20 46.10 37.90 36.70 34.40 32.80

2007 (Estimated) Country China India USA Japan Russia Spain S. Korea Turkey Italy Brazil Thailand Mexico Prodn. (Mi l.T) 1240 158 96.4 70.0 59.0 59.5 51.0 49.0 45.6 43.0 42.5 41.1

Indian Economy is Vibrant with Recent Annual GDP GROWTH of + 9.5%; Current Global Economic meltdown now pushed it to 7.5% and Further to down to 5.5%. It has NOW revived to 7.5 % . The Growth is Bound to be Speeded Up with Rapid Demand Generation of the growing Population of 1.4 billion. . India is Front-Ranking in a Number of Manufacturing and Agriculture Activities.
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Wor ld Total:

1068.69

1329.71

2139

2690 3

* FIM I (Fe derati on of Indian Mine ral In dustries) News Bulle tin, D elhi, Fe bru ary 2009 . # Dat a of CMA , Cembure au, and Japan Ce ment Assoc iat ion.

PLANNED INFRASTRUCTURE GROWTH TASKS AHEAD

INDIAN CEMENT INDUSTRY STATUS 20082008-09

20 Million Houses for Rural and Urban Population 9500 Km Roads for Golde n Quadrilateral Conne cting Metros (Delhi Mumbai- Kolkata-Chennai). 7300 Km Road for East to West and North to South Highway Corridor. 50, 000 MW Additional Powe r Gene ration - Both Hydel (25%) and The rmal (70%) to meet 1,00,000 MW additional Powe r Demand in next 5 ye ars. 2,60,000 Village s Conne ctivity by All-Weathe r Roads. High Density corridors of NH & SH to Ports 10,000 Km. Rural Roads for All Weathe r Conne ctivity 0.74 million Km. 45 Mode rn Ports to dot the 7600 km Coastline . 32 SEZs in Coastal and Urban Locations including 5 Coastal. 1.05 million Km Road in addition to 3.3 million Km Road unde r NH & SH for rural connectivity. Such Growth will fuel spiraling Demand of Steel and Cement.

International Ranking Installed Annual Capacity Production* Average Annual Growth Rate (w.r.t last Year) No. of Plants

2nd 217.8 Million Tonnes 181.42 Million Tonnes 7.79%

Large : 108 + 36 Grinding Units Mini** 206 Rotary : 13 VS K : 193
** AIMCMA 2006
(All India Mini Cement Manufacturers Association)

Source: Planning Commission Report Source: CMA Database. 5 6

GROWTH TRENDS PAST 3 DECADES

GROWTH & FORECASTS

Record Past 50 Years Capacity Mln.t. (Production) Forecast 20 Years Ahead (Capacity Mln.t.)

Year 1981 1991 2001 2010

Capacity (Mil.Tonnes) 29 61 133 234

1955 1965 1975 1985 1995 2005

5.02 (4.60) 12.00 (10.97) 19.76 (18.00) 41.85 (31.11) 82.06 (62.08) 160.24 (136.67)

Inference: Industry Doubles Capacity in Every 10 Years.

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2008 2010 2012 2015 E 2020 E 2025 E 2030 E 2050 E

209.40 (174.32) 269.07* 294* (High Growth) 280 291 # 400 560 520 # 600 540 # 646 840 #

Source: Basic D ata, CMA * 11th Planning Commission Working Group Report - Cement

E Estimated. - Cement International, Vol.5/2005. # - IEA (International Energy Agency)

LARGER CAPACITY PLANTS PROVIDE LESSER ENERGY CONSUMPTN

150 144 137 130 123 126 131

PLANTS WITH CAPACITY OF ONE MILLION TONNES AND ABOVE

Indian Cement Industry Year Total No. of Total Capacity Plants (Mn.t.) 123 126 130 131 137 144 133.55 144.98 159.80 165.46 190.45 209.40 Large Capacity (> 1 MTPA) Plants No. of Plants 62 68 73 76 82 88 Capacity (Mn.t.) 106.90 119.06 133.60 138.72 146.24 173.61 % of Total Capacity 80.0% 82.1% 83.6% 83.8% 76.8% 82.90%

100 88 76 73 68 62 82

2001 2004 2005 2006 2007 2008

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0 2001 2204 2005 2006 Plants >1 MTP A T o tal No. Pl ants 2007 2008

Source: CMA Database.

Source: CMA Database.

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PROGRESSIVE REDUCTION IN ENERGY CONSUMPTION BY INDIAN CEMENT INDUSTRY

Year 1950-60 Predominant Technology/ Process Wet 96% 1970 Semi-Dry 1980 Dry-4 Stage Preheater (PH) Precalc iner (PC) 85% 1990 Dry 90% Dry-5/6 Stage PH/PC, Vertical Roller Mill (VRM) & PreGrinders, Advanced Coolers 3300 6000 650 750 95 105 Post 2000 (Dry 96%) Double-Stream PH, Pyrostep Coolers, High Pressure Grinding Rolls, Advanced Kiln Control System, IT based Plant Operation

QUANTUM JUMP IN FLY ASH BASED PPC PRODUCTION (FROM 2000 TO 2007)
Year OPC PPC PSC Others Total %age PPC Growth w.r.t 99 -00
9% 21.8% 29.6% 37.5% 44%

1999-2000 2001-2002 2003-2004 2005-2006 2006-2007

62.76 (66.6%) 57.68 (56.3) 53.51 (45.5%) 55.84 (39.4%) 48.64 (31.2%) 42.84 (25.46%)

21.3 (22.6%) 32.3 (31.5%) 52.13 (44.4%) 74.01 (52.2%) 93.52 (60.1%) 111.21 (66.07%) 340%

9.39 (9.97%) 11.89 (11.6%) 11.26 (9.58%) 11.37 (8.0%) 12.89 (8.25%) 13.57 (8.06%) 36.75%

0.72 0.53 0.60 0.59 0.65 0.04

94.21 102.40 117.50 141.81 155.60 168.32

Capacity (Tonnes/ Day) Heat Consumption (K.Cal/Kg. Clinker)

Power Consumption (Kwh/Tonne Cement

300 600 1300 1600 115 130

600 1200 900 1000 110 125

2400 3000 800 900 105 115

4500 10000 650 750 80 - 100

Production Increase in 5 Years

- 22.5%

- 9.7%

65.16%

Source: NCB and CMA Database

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Source: CMA Database.

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CEMENT INDUSTRY & WASTE MANAGEMENT

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OUTSTANDING ENERGY CONSERVATION PERFORMANCE OF INDIAN CEMENT INDUSTRY

KEY PERFORMANCE INDICATORS 2007-08 Item Target for Xth Plan* (2001-02 to 2006-07) Performance Target for 11th Plan # (2007-08 to 2011-12)

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Indian Cement Industry is major user of flyash. Out of 130 mn.t. fly ash generated annually, only 40 mln.t. are recycled and cement industry consumed nearly 34 mln.t. (85%) fly ash in 2008. Cement industry consumes the entire quantity of granulated BF Slag around 8 mln.t. in 2008. The industry also consumes 90% fluoro and phospho-gypsum waste from fertilizer industry exceeding 3 mln.t. 2 cement majors have set up a Waste Recycling Company with planned investment of Rs.800 million, to recycle varied wastes to the tune of 0.8 to 1.0 mln.t. per annum (India produces 8 to 9 mln.t. hazardous and around 100 mln.t. non-hazardous wastes per year)
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2005-06 Average Energy Consumption * Thermal Energy K.Cal/Kg Clinker * Electrical Energy Kwh/t. Cement B est Energy Consumption * Thermal Energy K.Cal/Kg Clinker * Electrical Energy Kwh/t. Cement Capacity Utilization

2006-07 2007-08 723 92 720 92 663 (650) 63 (65) 95% 115 Plants 85 Plants 25 Plants All Plants 700 75

730 95 85%

725 95 667 68

Quality ISO 9000 Environment ISO 14001 OHSAS 18000 Emission Compliance

* Report of the Working Group on Cement Industry X Five Year Plan (2002-03 to 2006-07) # Report of the Working Group on Cement Industry XI Five Year Plan (2007-08 to 2011-12) Figures in ( ) brackets to Japanese Cement Industry

Source: CMA Database.

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SIGNIFICANT GHG EMISSION REDUCTION

Year Cement GHG Emission Ratio Production (Million GHG:Ceme (Million Tonnes) Tonnes) nt

CLEAN DEVELOPMENT MECHANISM [CDM] MREGISTERED CEMENT BASED PROJECTS COUNTRY COUNTRY-WISE
45 40 35 30 25 20 15 10 5 0
a l C hi na ge nt in Br az i R ic a

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1990 1995 2000 2005

44.87 67.08 102.20 142.67

53.84 76.65 98.98 130.82

1.20 1.14 0.98 0.92

In di a In do ne si a

Source: CMAs Project Report to MoEF NATCOM Project. * Reduction Calculated based on clinker substitution only.
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Source: Zenith Consultancy, Switzerland, June 2007 16

Number of CDM Projects from Cement Industry in India, by Type

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Waste Heat to Power Blended Cement Alternative Fuel and Biomass Use Energy Efficiency

ENGINES OF FUTURE GROWTH

Low Per Capita cement consumpn - 130 kg Long Haulage from Cement Production Clusters to Consumption Regions -Long Haulage (>645Km) of Cement to Consumers: Needs Rapid Transport System l Av. Distance of Transport - 595 km by rail and 678 Km by road l NE and NW Regions Traditionally Deficit l Scope of Increased Recycling of Industrial Wastes -Flyash and Slag with Cost Benefit 18
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C os t

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U ru gu ay

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FUTURE GROWTH TRENDS TOWARDS SUSTAINABILITY

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FUTURE GRFOWTH TRENDS TOWARDS SUSTAINABLE GROWTH

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MORE STAND ALONE GRINDING UNITS NEAR METROPOLIS- HAULAGE ECONOMY . JUMBO CAPACITY PLANTS OF + 5000 TO +10,000 TPD CAPACITY . COAST BASED PLANTS FOR EXPORT . RAPID SWITCH OVER FROM OPC TO PPC AND PSC
Contd...
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Merger and Acquisition of Smaller Capacities l Use of Larger Volume Waste Derived Fuels l GHG Emission Reduction l Ready Mix Concrete and Bulk Supply to Gain Eminence for Cost Reduction l More Cement Concrete Roads
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WISH LIST OF CEMENT INDUSTRYINDUSTRYTOWARDS SUSTAINABLE GROWTH

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TECHNOLOGY UPGRADATION NEEDS TOWARDS SUSTAINABLE GROWTH

Easy Indigenous Availability of Primary Fuel Coal. Industrial Wastes Fly Ash and Blast Furnace Slag Should be Available Free under Polluter Pays Principle . Bulk Supply and Ready Mix Concrete to Gain Popularity through all round Publicity. Rail Transport (presently 40%) to increase its share for Lower Cost Transport of Cement, Fly Ash. Scope for Hassle-Free Recycling of Hazardous Combustibles More Concrete Roads in Infrastructure Development for Sustainability

In- pit Crushing and Conveying Pipe Conveying of Raw Materials , Cement etc. l Neurofuzzy Expert System for Opern. Control l Waste-Heat based Cogeneration of Power l Bulk Transport of Cement l Palletising and Shrink Wrapping for Packing/ Despatch
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R & D THRUST NEEDS ---TOWARDS TOWARDS SUSTAINABLE GROWTH

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BARRIERS IN SUSTAINABLE GROWTH TARGET FULFILMENT WASTE/ INDUSTRIAL BYPRODUCT USE

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Co-processing Hazardous Combustible Wastes Fly ash Quality Upgradation for Enhanced Use Development of Nanotechnology based Cements & Binders Improving Energy-Efficiency in Size Reduction Operations Lower Cost Technologies for Waste Heat based Cogeneration Development or Adaptation of Low NOx and Low S02 Technologies Development of Algal Farms for CO2 Absorption from Cement S Manufacture

Polluter Pays Principle not Observed. Escalating Costs of Sourcing Fly Ash and Slag. Road (not Rail) Transport for Long Distances Escalates Landed Cost for Consumers. Bagged Supply of Cement adds Cost and Handling Charges and more Transit Loss. Ready Mix Concrete, hardly < 8% of Total Concrete Produced, yet to gain Popularity.
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BARRIERS IN SUSTAINABLE TARGET FULFILMENT FUEL SECURITY

BARRIERS IN SUSTAINABLE GROWTH TARGET FULFILMENT REGULATORY / STANDARDS

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Scarce availability of Indigenous Primary Fuel to meet demand of Fast Growing Capacity. l Escalating Costs of Imported Coal and Shipping Tariff. l Regulatory Bottlenecks in Inter-State Transport of Hazardous Combustibles for Use as Alternate Fuel.
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Rigidity of Standards mostly Specification Oriented and not Performance Oriented (as in EU Countries) restricts addition of Performance Improvers/Activating Agents etc. Limitations of Use of Alternate and Hazardous Fuels needing Clearance on Case to Case Basis in Absence of Specific Guidelines. Limitations of Specifications Restricts Use of Petroleum Coke and other Fuel Substitutes.
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DESIRED POLICY MEASURES FOR SUSTAINABLE GROWTH -TARIFF

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DESIRED POLICY MEASURES FOR SUSTAINABLE GROWTH INFRASTRUCTURE AND INPUTS

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Very High Taxes and Levies (30% of Sale Price and 80% of Cost of Production), e.g. Compared to China (19%) or Malaysia (0%) Deserves Rationalisation Abolition of Import Duty on Coal and Petcoke Permitting Duty-free Import of Shredded Tires by End Users for Use as Alternate Fuel Lower Rate of Royalty for Low Grade (High Silica or Magnesia) Limestone for Resource Conservation

Overstretched Infrastructure for Coal and Power Supply, Rail Transportation Causing Delays Need be Enhanced Need Ensuring 80% Coal Requirement for the Industry Through Linkages Encouraging Captive Power Plants by Industry with Ensured Coal Linkage Target of 60% Transport of Cement and Clinker by Rail Need be Fulfilled Transport of Fly ash for Long Distance only by Rail To Encourage Transportation of Bulk Cement over Long Distance by Rail
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DESIRED POLICY MEASURES FOR SUSTAINABLE GROWTH ENVIRONMENTAL

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DESIRED POLICY MEASURES FOR SUSTAINABLEMGROWTH PROMOTIONAL

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Dwindling Limestone Availability in Mainland Calls for Relaxation in Coastal Areas of Clearances under Coastal Regulation Zones Environmenal Clearences for New Plants or Expansion - Procedures Need be Time bound, Streamlined and Expeditious Eco-Friendly Mining need be Permitted to Exploit Limestone Deposits in Cement Deficit and EcoSensitive Regions
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Allotment of Coal Blocks to Cement Industry on Priority to help keep the Pace of Growth of the Industry with Ensured Fuel Security Encouragement of Coal Mining for Captive Use by Industry Sectors Promoting Lignite based Cement Plants Promoting Use of Slag or Fly ash based Cements for Long Term Durability of Constructions and Environmental Sustainability
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