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Rocky road ahead

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The cement industry is likely to hit the pause button on the backdrop of recent developments like demonetisation, pending legislations like RERA & GST, and rising crude oil prices.

Housing and construction are the sectors most impacted by demonetisation. While market participants aver things will normalise in three-six months, the impact is enough to postpone the much-awaited recovery in cement demand by another year or so. Further, we fear a longer slump in secondary/unorganised real estate markets which drive a large proportion of cement sales (IHB). We also do not believe that a rebound in infrastructure demand will be enough to offset the above-mentioned slump in housing.

Given the impending slowdown in secondary/unorganised real estate markets, the vulnerability is higher for companies which derive bulk of their profitability from higher realisations (higher trade sales).

Cement sector valuations were pricing in a strong recovery pre-November 8, when demonetisation was announced (EV/EBITDA 12-17x 1yr Fwd). Despite recent correction, they still trade at 10-15x 1yr Fwd EV/EBITDA, once the impact of lower demand is factored in. We suspect some more downside as 3QFY17 will represent the confluence of negatives as both volumes and costs get hit.

We expect cement multiples to de-rate further. However, sector leaders (UltraTech/Shree Cement) should continue to command premium to historical averages and will be attractive when multiples approach historical averages (10x or so).

Till October, cement apparent demand had grown by ~5.1% year-on-year. Further, strong monsoons had lifted the possibility of a strong revival in demand, especially from some of the drought-hit regions in Maharashtra, Telangana and Karnataka. However, post demonetisation, things have taken a turn for the worse.

Our recent channel checks suggest sharp cuts in volumes across regions. The impact is more severe in regions with rural/IHB bias. We hear 25-50 per cent demand declines in north/central and Chhattisgarh. The more urbanised west/south are reporting ~15-30 per cent lower volumes. Parti?cipants maintain that December volumes will be worse hit compared to November. These numbers may be overstated, given extreme prevalent pessimism, but the downside is still significant. Earnings in past two-three quarters were driven by cheap pet coke. Things are likely to flip at the most inopportune time for cement firms, as spiking energy costs begin to sting at around the same time when volumes are likely to be low.

As a result 3QFY17 will be one of the worst quarters for cement companies in recent times. Upcoming elections in five states, including UP and Punjab, will likely further weigh on demand, given that the election code of conduct weighs on government spending. As a result, we remain cautious. Domestic demand growth has registered a double digit de-growth exactly once, in 4QFY01 (-10.4 per cent). This was an outcome driven by a number of factors: drought in four states, slowdown in real estate and the Gujarat earthquake.

With almost a month into the demonetisation exercise, we suspect cement demand could see a repeat of 4QFY01.
Source: HDFC Securities

Mangesh Bhadang, Analyst at brokerage Nirmal Bang, said, ‘We expect demand disruption to push down cement demand recovery by at least a year and hence capacity utilisation will be lower for a longer period than what was expected earlier.’The industry is expected to be impacted not only by the slowdown caused by the cash crunch, but also the impasse over the Goods and Services Tax (GST) Bill and the regulatory legislation for the Real Estate (Regulation and Development) Act or RERA. The impact, according to the analyst, is phenomenal: from an estimated growth rate of 6 per cent for the current fiscal made in September 2016, it now actually stands at a decline of 1.3 per cent. Fiscal 2018 is likely to see a growth rate of 6.7 per cent, making the years of high growth a thing of the past.

‘We also believe that the golden period of demand growth witnessed between FY06 to FY10 is unlikely to be repeated in the near future,’ Bhadang wrote in his note.

Impact of rising crude oil prices
As if the domestic headwinds were not enough, the industry has also to contend with the end of low input costs, giving the trend of rising crude oil prices globally. ‘Cement companies’ earnings were aided by softening of input prices over the past two years, predominantly coal/pet coke and freight rates through lower diesel prices. We believe that this period of decline in input costs is largely over, as prices of various input products like international coal, pet coke and diesel are on the rise. With demand expected to be low, we believe that cost inflation will test pricing power in the industry,’ Bhadang said.

Cement manufacturing companies in India include Ambuja Cement, ACC, UltraTech, JK Cement, Prism Cement and Shree Cements. India is the second-largest producer of cement in the world, after China.

Capacity utilisation to remain stagnant: ICRA
In the first seven months of FY17, demand growth in the cement sector was already modest at 4.8 per cent. After the note ban, the sector is likely to be affected negatively by disruption to the real estate sector, says the rating agency.

The cement sector is one of the worst hit by demonetisation. Despite limited capacity addition, capacity utilisation of the cement industry is likely to remain stagnant in fiscal year 2017 as demand growth is expected to be weak, rating agency ICRA said in a report. In the first seven months of FY17, demand growth in the cement sector was already modest at 4.8 per cent and after the note ban, is likely to be affected negatively by disruption to the real estate sector.

The cement sector is one of the worst hit by demonetisation; volumes have been dented severely and a pick-up in consumption may not happen anytime soon. Hence, the outlook for the second half of FY17 is unlikely to be as bright as anticipated earlier by many analysts.

Uncharted Territory
Uncertainty remains on demand, pricing and margins, says Vivek Maheshwari, Investment Analyst.

The Indian cement sector is on a shaky foundation and there are multiple uncertainties as we start the seasonally strong period (Jan-May) of 2017.

Demonetisation has impacted demand, although flattish production volume (year-on-year) in November 2016 is a positive. The industry is hopeful of a recovery through 2017, though monthly trends could be quite volatile. Demonetisation has, however, impacted prices, which are down 1-5 per cent month-on-month in December 16, as per our channel checks. The timing of demonetisation is quite inappropriate for the industry, as energy costs (pet coke, coal and diesel) have been steadily trending up. We expect heightened volatility in margins ahead, as several variables are at play and we are negative on all the stocks except UltraTech which is our only relative pick.

Concerns on demand
Cement volumes across regions have been impacted, particularly in December 16. While liquidity issues will ease gradually, the channel is still concerned on demand due to factors like impact on end-user industry and supply-chain issues in case of ancillary industries (sand, aggre?gates, etc.) and hence, demand trend may be weak. The government’s thrust on social housing and infrastructure should support cement demand but we are unsure if this could fully offset the impact.

Pricing pressures
Demand pressures may deter the cement industry from increasing prices significantly, which is typically expected during 1H-2017 due to seasonality. While the industry has shown strong discipline in the past few quarters, a potentially weak demand trend may change dynamics and result in pricing pressures. Prices have actually declined by 1-5 per cent across regions, though the industry would attempt to reverse these in the coming months.

High volatility in margins ahead
For example, pet coke prices are up 140 per cent from the bottom, while imported coal prices are up 79 per cent and rupee depreciation further exacerbates the impact; diesel prices are also up 31 per cent from the recent lows. This would impact sector margins in the near term and would also delay the margin recovery by a few quarters.

Negative view stays
This has taken multiples to above-historical averages, also partially on expectations of a strong recovery in margins, which we believe are at risk in the current context, as volumes are weak, pricing power is impaired, and costs are rising.

A majority of cement demand (55-65 per cent) comes from the housing sector. It is important to see how the sector is going to fare in 2017. The end of 2017 is most likely to see the initiation of a robust and sustainable growth trajectory for India’s real estate industry and will be recognised as the base for the future growth of this sector, says Shishir Baijal, Chairman and Managing Director, Knight Frank (India) Pvt. Ltd.

In the first week of November 2016 the overall positive sentiment was attributed to a host of factors including the political stability, regulatory environment, enhanced infrastructure, strong investments, approval to the GST bill, and amendments to REITs.

Just when the industry was was gearing up to meet the deadlines set by the government for Real Estate (Real Estate Regulation & Development Act Act 2016 (RERA) and Goods and Services Tax (GST),) it received a jolt in the form of demonetisation of the INR 500 and 1000 currency notes with immediate effect.

Another imminent change that will impact the sector in the days to come is the partial implementation of RERA. RERA, once implemented, will increase transparency, which in turn will bring back buyer confidence. Developers, on the other hand, will have to adjust to the new environment and more specifically, they have to change their business model whilst adhering to stricter compliance norms.

The impact of demonetisation is a transient one and the economy will undergo structural changes for the first three quarters of 2017. The industry awaits the implementation of policy reforms like RERA & GST, medium term impact of demonetisation and listing of REIT. During this phase, enterprises are expected to streamline their business processes and implement international best practices to adhere to the upcoming changed business environment. There will be a greater influence of FDI (Foreign Direct Investment) that will help create jobs and revitalise growth within the sector. Overall, institutional participation-both domestic and global markets-will help the sector in getting high quantum of funds at competitive rates. In view of the various procedural changes adopted by the government, it is also expected to be an important facilitator in bringing back stability within the real estate sector.

The end of 2017 is most likely to see the initiation of a robust and sustainable growth trajectory for India’s real estate industry and will be recognised as the base for the future growth of this sector.

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Economy & Market

Smart Pumping for Rock Blasting

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SEEPEX introduces BN pumps with Smart Joint Access (SJA) to improve efficiency, reliability, and inspection speed in demanding rock blasting operations.
Designed for abrasive and chemical media, the solution supports precise dosing, reduced downtime, and enhanced operational safety.

SEEPEX has introduced BN pumps with Smart Joint Access (SJA), engineered for the reliable and precise transfer of abrasive, corrosive, and chemical media in mining and construction. Designed for rock blasting, the pump features a large inspection opening for quick joint checks, a compact footprint for mobile or skid-mounted installations, and flexible drive and material options for consistent performance and uptime.

“Operators can inspect joints quickly and rely on precise pumping of shear-sensitive and abrasive emulsions,” said Magalie Levray, Global Business Development Manager Mining at SEEPEX. “This is particularly critical in rock blasting, where every borehole counts for productivity.” Industry Context

Rock blasting is essential for extracting hard rock and shaping safe excavation profiles in mining and construction. Accurate and consistent loading of explosive emulsions ensures controlled fragmentation, protects personnel, and maximizes productivity. Even minor deviations in pumping can cause delays or reduce product quality. BN pumps with SJA support routine maintenance and pre-operation checks by allowing fast verification of joint integrity, enabling more efficient operations.

Always Inspection Ready

Smart Joint Access is designed for inspection-friendly operations. The large inspection opening in the suction housing provides direct access to both joints, enabling rapid pre-operation checks while maintaining high operational reliability. Technicians can assess joint condition quickly, supporting continuous, reliable operation.

Key Features

  • Compact Footprint: Fits truck-mounted mobile units, skid-mounted systems, and factory installations.
  • Flexible Drive Options: Compact hydraulic drive or electric drive configurations.
  • Hydraulic Efficiency: Low-displacement design reduces oil requirements and supports low total cost of ownership.
  • Equal Wall Stator Design: Ensures high-pressure performance in a compact footprint.
  • Material Flexibility: Stainless steel or steel housings, chrome-plated rotors, and stators in NBR, EPDM, or FKM.

Operators benefit from shorter inspection cycles, reliable dosing, seamless integration, and fast delivery through framework agreements, helping to maintain uptime in critical rock blasting processes.

Applications – Optimized for Rock Blasting

BN pumps with SJA are designed for mining, tunneling, quarrying, civil works, dam construction, and other sectors requiring precise handling of abrasive or chemical media. They provide robust performance while enabling fast, reliable inspection and maintenance.With SJA, operators can quickly access both joints without disassembly, ensuring emulsions are transferred accurately and consistently. This reduces downtime, preserves product integrity, and supports uniform dosing across multiple bore holes.

With the Smart Joint Access inspection opening, operators can quickly access and assess the condition of both joints without disassembly, enabling immediate verification of pump readiness prior to blast hole loading. This allows operators to confirm that emulsions are transferred accurately and consistently, protecting personnel, minimizing product degradation, and maintaining uniform dosing across multiple bore holes.

The combination of equal wall stator design, compact integration, flexible drives, and progressive cavity pump technology ensures continuous, reliable operation even in space-limited, high-pressure environments.

From Inspection to Operation

A leading explosives provider implemented BN pumps with SJA in open pit and underground operations. By replacing legacy pumps, inspection cycles were significantly shortened, allowing crews to complete pre-operation checks and return mobile units to productive work faster. Direct joint access through SJA enabled immediate verification, consistent emulsion dosing, and reduced downtime caused by joint-related deviations.

“The inspection opening gives immediate confidence that each joint is secure before proceeding to bore holes,” said a site technician. “It allows us to act quickly, keeping blasting schedules on track.”

Framework agreements ensured rapid pump supply and minimal downtime, supporting multi-site operations across continents

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Concrete

Digital process control is transforming grinding

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Satish Maheshwari, Chief Manufacturing Officer, Shree Cement, delves into how digital intelligence is transforming cement grinding into a predictive, stable, and energy-efficient operation.

Grinding sits at the heart of cement manufacturing, accounting for the largest share of electrical energy consumption. In this interview, Satish Maheshwari, Chief Manufacturing Officer, Shree Cement, explains how advanced grinding technologies, data-driven optimisation and process intelligence are transforming mill performance, reducing power consumption and supporting the industry’s decarbonisation goals.

How has the grinding process evolved in Indian cement plants to meet rising efficiency and sustainability expectations?
Over the past decade, Indian cement plants have seen a clear evolution in grinding technology, moving from conventional open-circuit ball mills to high-efficiency closed-circuit systems, Roller Press–Ball Mill combinations and Vertical Roller Mills (VRMs). This shift has been supported by advances in separator design, improved wear-resistant materials, and the growing use of digital process automation. As a result, grinding units today operate as highly controlled manufacturing systems where real-time data, process intelligence and efficient separation work together to deliver stable and predictable performance.
From a sustainability perspective, these developments directly reduce specific power consumption, improve equipment reliability and lower the carbon footprint per tonne of cement produced.

How critical is grinding optimisation in reducing specific power consumption across ball mills and VRMs?
Grinding is the largest consumer of electrical energy in a cement plant, which makes optimisation one of the most effective levers for improving energy efficiency. In ball mill systems, optimisation through correct media selection, charge design, diaphragm configuration, ventilation management and separator tuning can typically deliver power savings of 5 per cent to 8 per cent. In VRMs, fine-tuning airflow balance, grinding pressure, nozzle ring settings, and circulating load can unlock energy reductions in the range of 8 per cent to 12 per cent. Across both systems, sustained operation under stable conditions is critical. Consistency in mill loading and operating parameters improves quality control, reduces wear, and enables long-term energy efficiency, making stability a key operational KPI.

What challenges arise in maintaining consistent cement quality when using alternative raw materials and blended compositions?
The increased use of alternative raw materials and supplementary cementitious materials (SCM) introduces variability in chemistry, moisture, hardness, and loss on ignition. This variability makes it more challenging to maintain consistent fineness, particle size distribution, throughput and downstream performance parameters such as setting time, strength development and workability.
As clinker substitution levels rise, grinding precision becomes increasingly important. Even small improvements in consistency enable higher SCM utilisation without compromising cement performance.
Addressing these challenges requires stronger feed homogenisation, real-time quality monitoring and dynamic adjustment of grinding parameters so that output quality remains stable despite changing input characteristics.

How is digital process control changing the way grinding performance is optimised?
Digital process control is transforming grinding from an operator-dependent activity into a predictive, model-driven operation. Technologies such as online particle size and residue analysers, AI-based optimisation platforms, digital twins for VRMs and Roller Press systems, and advanced process control solutions are redefining how performance is managed.
At the same time, workforce roles are evolving. Operators are increasingly focused on interpreting data trends through digital dashboards and responding proactively rather than relying on manual interventions. Together, these tools improve mill stability, enable faster response to disturbances, maintain consistent fineness, and reduce specific energy consumption while minimising manual effort.

How do you see grinding technologies supporting the industry’s low-clinker and decarbonisation goals?
Modern grinding technologies are central to the industry’s decarbonisation efforts. They enable higher incorporation of SCMs such as fly ash, slag, and limestone, improve particle fineness and reactivity, and reduce overall power consumption. Efficient grinding makes it possible to maintain consistent cement quality at lower clinker factors. Every improvement in energy intensity and particle engineering directly contributes to lower CO2 emissions.
As India moves toward low-carbon construction, precision grinding will remain a foundational capability for delivering sustainable, high-performance cement aligned with national and global climate objectives.

How much potential does grinding optimisation hold for immediate energy
and cost savings?
The potential for near-term savings is substantial. Without major capital investment, most plants can achieve 5 per cent to 15 per cent power reduction through measures such as improving separator efficiency, optimising ventilation, refining media grading, and fine-tuning operating parameters.
With continued capacity expansion across India, advanced optimisation tools will help ensure that productivity gains are not matched by proportional increases in energy demand. Given current power costs, this translates into direct and measurable financial benefits, making grinding optimisation one of the fastest-payback operational initiatives available to cement manufacturers today.

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Concrete

Refractory demands in our kiln have changed

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Radha Singh, Senior Manager (P&Q), Shree Digvijay Cement, points out why performance, predictability and life-cycle value now matter more than routine replacement in cement kilns.

As Indian cement plants push for higher throughput, increased alternative fuel usage and tighter shutdown cycles, refractory performance in kilns and pyro-processing systems is under growing pressure. In this interview, Radha Singh, Senior Manager (P&Q), Shree Digvijay Cement, shares how refractory demands have evolved on the ground and how smarter digital monitoring is improving kiln stability, uptime and clinker quality.

How have refractory demands changed in your kiln and pyro-processing line over the last five years?
Over the last five years, refractory demands in our kiln and pyro line have changed. Earlier, the focus was mostly on standard grades and routine shutdown-based replacement. But now, because of higher production loads, more alternative fuels and raw materials (AFR) usage and greater temperature variation, the expectation from refractory has increased.
In our own case, the current kiln refractory has already completed around 1.5 years, which itself shows how much more we now rely on materials that can handle thermal shock, alkali attack and coating fluctuations. We have moved towards more stable, high-performance linings so that we don’t have to enter the kiln frequently for repairs.
Overall, the shift has been from just ‘installation and run’ to selecting refractories that give longer life, better coating behaviour and more predictable performance under tougher operating conditions.

What are the biggest refractory challenges in the preheater, calciner and cooler zones?
• Preheater: Coating instability, chloride/sulphur cycles and brick erosion.
• Calciner: AFR firing, thermal shock and alkali infiltration.
• Cooler: Severe abrasion, red-river formation and mechanical stress on linings.
Overall, the biggest challenge is maintaining lining stability under highly variable operating conditions.

How do you evaluate and select refractory partners for long-term performance?
In real plant conditions, we don’t select a refractory partner just by looking at price. First, we see their past performance in similar kilns and whether their material has actually survived our operating conditions. We also check how strong their technical support is during shutdowns, because installation quality matters as much as the material itself.
Another key point is how quickly they respond during breakdowns or hot spots. A good partner should be available on short notice. We also look at their failure analysis capability, whether they can explain why a lining failed and suggest improvements.
On top of this, we review the life they delivered in the last few campaigns, their supply reliability and their willingness to offer plant-specific custom solutions instead of generic grades. Only a partner who supports us throughout the life cycle, which includes selection, installation, monitoring and post-failure analysis, fits our long-term requirement.

Can you share a recent example where better refractory selection improved uptime or clinker quality?
Recently, we upgraded to a high-abrasion basic brick at the kiln outlet. Earlier we had frequent chipping and coating loss. With the new lining, thermal stability improved and the coating became much more stable. As a result, our shutdown interval increased and clinker quality remained more consistent. It had a direct impact on our uptime.

How is increased AFR use affecting refractory behaviour?
Increased AFR use is definitely putting more stress on the refractory. The biggest issue we see daily is the rise in chlorine, alkalis and volatiles, which directly attack the lining, especially in the calciner and kiln inlet. AFR firing is also not as stable as conventional fuel, so we face frequent temperature fluctuations, which cause more thermal shock and small cracks in the lining.
Another real problem is coating instability. Some days the coating builds too fast, other days it suddenly drops, and both conditions impact refractory life. We also notice more dust circulation and buildup inside the calciner whenever the AFR mix changes, which again increases erosion.
Because of these practical issues, we have started relying more on alkali-resistant, low-porosity and better thermal shock–resistant materials to handle the additional stress coming from AFR.

What role does digital monitoring or thermal profiling play in your refractory strategy?
Digital tools like kiln shell scanners, IR imaging and thermal profiling help us detect weakening areas much earlier. This reduces unplanned shutdowns, helps identify hotspots accurately and allows us to replace only the critical sections. Overall, our maintenance has shifted from reactive to predictive, improving lining life significantly.

How do you balance cost, durability and installation speed during refractory shutdowns?
We focus on three points:
• Material quality that suits our thermal profile and chemistry.
• Installation speed, in fast turnarounds, we prefer monolithic.
• Life-cycle cost—the cheapest material is not the most economical. We look at durability, future downtime and total cost of ownership.
This balance ensures reliable performance without unnecessary expenditure.

What refractory or pyro-processing innovations could transform Indian cement operations?
Some promising developments include:
• High-performance, low-porosity and nano-bonded refractories
• Precast modular linings to drastically reduce shutdown time
• AI-driven kiln thermal analytics
• Advanced coating management solutions
• More AFR-compatible refractory mixes

These innovations can significantly improve kiln stability, efficiency and maintenance planning across the industry.

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