Connect with us

Concrete

A balance has to be drawn between cost and service

Published

on

Shares

Vimal Choudhary, President and Logistics Head – HeidelbergCement India, discusses how bulk distribution impacts cost and the measures his company is taking to ensure smooth operations of their distribution channels.

What is the volume of production in your cement plants and how much of it goes in bulk distribution?
Currently, HeidelbergCement India produces about 9MT cement pan-India. Our production is divided in two parts, central India and south India producing 4.8 MT and 4.2 MT respectively.
23 per cent produced in the south is transported through bulk. In central India, we do not transport on a bulk basis.

Which is the most suitable mode of transport for carrying large quantities of cement and why?
Depending on the distance, we choose the most viable mode of transport for cement. Preference is always based on that. For shorter distances, roadways are considered as it takes less time to reach the customer, handling is less and cost is less. If cement needs to be sent to a longer distance, then railways is preferred as it would allow a much larger quantity to be transported in one go.
Earlier there were concessions allotted to cement manufacturers for transporting cement through the railways, however, those have been withdrawn now. However, what we choose as a mode of transport is not only based on cost, it is also dependent on the service to the customer.
By road, the end product directly reaches the customer. The bag quality remains good with the least amount of deterioration to the bag. But in case of rail, the material goes through material handlings like from factory to railway platform, platform to cargo containers. It is then loaded into smaller trucks at the destination and then reaches the customer. In some cases, it goes to the warehouse, then railways, then customers. This amount of bag handling hampers the bag quality. When the distance to be covered is beyond 300 km, then we consider rail transport as it also presents a large cost advantage.

What are the various advantages attached to bulk distribution of cement?
There are various advantages attached to bulk distribution of cement.
Foremost advantage in transporting cement by bulk is to the environment. In this transportation, we end up using a smaller number of plastic bags which would otherwise be used in smaller quantities of transport. Along with that, dust emission is also very low as compared to loading and unloading of smaller quantities.
A major advantage of transporting cement in bulk is the saving of bag cost. It costs less than transporting smaller quantities and that is why it is widely considered.
A technical advantage is experienced during monsoon. Due to the high humidity levels and moisture, cement usually gets hydrated, which is a loss for us. However, in bulk transportation there is no hydration as the bulkers are air-tight.
Smaller quantities bagged cement present a large chance of adulteration, however, that is not possible in case of bulk transportation. Once the bulker is locked, it is unlocked only at the destination upon reaching the customer.

How does distribution or transportation of cement in bulk impact the end user cost of the product?
In case of bulk, we save a certain amount on the bag cost, but pay a higher amount in freight cost. Example, the cost of a bulker is higher than the bulk trucks. More or less, the cost almost balances itself. Ultimately, the customer gets to witness only a minor difference in their cost. However, bulk buyers get good discounts from us as they pick up large quantities from us.
This cost and demand are different from market to market.

What are the major challenges or gaps faced by your organisation in the bulk distribution domain?
One of the major challenges that we face with bulk cement is consistency in orders. We cannot transport this bulk of transport to anyone else. There are limited buyers in the market. If the orders are received on a regular basis, our system works smoothly and the customer also keeps receiving their cement load in a timely fashion.
Sometimes in South India, we face detention time for the bulkers. Sometimes when we send our bulker to the customer, their silo may already be full. They then utilise their pre-existing load, empty the silo to accommodate cement from the bulker. This duration accounts as cost to us as it is a detention time for the bulker.
Countering this challenge is dependent on the market because bulk buyers are limited. For example, in Bangalore, we sell 25 per cent cement in bulk and 75 per cent cement in bags. We cannot switch over the customers. Only those in need will purchase or consume the product. This gap can be filled by installing more silos which will create space for some more quantity of cement storage and allow bulkers to be free sooner with a lesser detention time.
There are some organisations that are providing silos to customers to promote purchases in bulk cement. The idea behind this is to work towards reducing carbon emission. And bulk cement is preferred as it is environment friendly.
Taking examples from the mature markets of the western countries, they are all consumers of bulk cement. In India, buyers only from the big cities have bulk purchases, buyers from other cities still prefer purchases in small quantities.

Is there a specific reason why international markets have bulk cement transportation in much larger quantities?
Traditionally people in the international markets prefer a ready mix. In some countries there are laws that do not allow mixing to be done at the site, hence, the consumption of ready mix. These users consume bulk cement. Bag cement is used for smaller repair purposes, but if a larger construction project is happening, bulk ready mix orders are placed.

Explain your organisation’s distribution model.
Our distribution in central India is 55 per cent by rail and 45 per cent by road. In south India, 90 per cent distribution happens by road and 10 per cent by rail.
This difference between the use of rail and road in South India and Central India stem from the difference in the distances. In South India, point A to point B is shorter by road as compared to by rail.
We are operating about 70 warehouses in central India and about 90 warehouses in south India. This helps us provide better services to our customers. As a logistics manager, I will always prefer direct delivery to the customer as it involves the least damage to the product and saving of cost as well. But ultimately, a balance has to be drawn between the cost and the service to the customers and warehouses allow us to do that. Most of these warehouses are
maintained in bigger cities where the entry restrictions are a minimum.

Is the preference of using roadways more than railways also stemming from the road conditions of the country?
The road conditions in India have in recent times become so much better. National Highways are in good condition and provide great connectivity as well. Earlier we used to have smaller trucks – 15 tonnes or 18 tonners, the size of those have increased to become 36 tonners. To take cement to warehouses, we sometimes use 45 tonner trucks also.
Roadways have largely improved their condition as compared to railways. Earlier the industry transported 36 per cent by rail, 62 per cent by road and 2 per cent by sea. Now the rail coefficient has significantly dropped to 25 per cent. Since it is easier to handle the material, organisations are preferring roadways as a medium to transport their product.
At the railway platforms, we have to deal with unions for secondary movements or product handling which is a tricky affair. Roadways take the material to the customers with minimum handling.

How can a curated logistics system help in achieving the sustainability goals for the industry?
Logistics of a cement plant can contribute to the sustainability goals in a couple of ways.
Increasing the transportation by rail will result in a better environment. The carbon emission in railway transportation is much lower compared to roadways. Bulk cement transportation should be increased, as it will largely reduce the use of plastic bags and the dust emission that happens in loading and unloading of smaller packs. From the warehouses, we use trucks that use diesel or other fossil fuel, instead, the organisations must use CNG fitted trucks for shorter delivery distances. This will largely reduce the carbon dioxide emitted and better the environment.
Our organisation is focused on achieving its sustainability goals. We plant trees and also push our transporters to plant trees as well.

What are the key changes the industry is likely to witness in the near future?
With rising competition in the industry, service levels have become very important to the customers. They always chose those that provide materials the fastest. Services for the customers are going to significantly increase and become better in the
near future.
Driver scarcity is also something I can see in the near future for the industry. Currently we also have availability of trucks but a lack of drivers. This is happening mainly because it isn’t a lucrative enough business and requires a much larger labour. This is the reason people aren’t going for truck driver training and are opting for other paying roles. The industry needs to build an incentive plan to attract more drivers for our fleet.
Another change in the future will be reduced lead time and distance from the markets.
Some organisations have started installing grinding units closer to the market to achieve the same.
And more organisations will follow a similar pattern. This will also make material reach much faster to the customers.

Kanika Mathur

Concrete

Indian Cement Industry Sees Further Consolidation

Cement industry to face consolidation soon.

Published

on

By

Shares



India’s cement sector is set for further consolidation in the near-to-medium term, according to a recent report. With increasing competition, rising input costs, and the need for economies of scale, companies are expected to explore mergers and acquisitions (M&A) to strengthen their market positions. As the industry faces various challenges, including high energy costs and fluctuating demand, consolidation is viewed as a strategic move to drive growth and sustainability.

Key Points:
Market Consolidation: The Indian cement industry has already witnessed significant consolidation over the past few years, with several large firms acquiring smaller players to enhance their market share. The trend is expected to continue, driven by the need to optimize operations, cut costs, and gain better pricing power. Consolidation helps companies to expand their geographic reach and strengthen their portfolios.

Rising Costs and Challenges: One of the primary drivers of consolidation is the rising cost of inputs, particularly energy and raw materials. With costs of coal and petroleum coke (key energy sources for cement production) soaring, companies are looking for ways to maintain profitability. Smaller and medium-sized players, in particular, find it challenging to cope with these rising costs, making them more likely targets for acquisition by larger companies.

Economies of Scale: Larger cement companies benefit from economies of scale, which help them absorb the impact of rising input costs more effectively. Consolidation allows firms to streamline production processes, reduce operational inefficiencies, and invest in advanced technologies that improve productivity. These efficiencies become critical in maintaining competitiveness in an increasingly challenging environment.

M&A Activity: The report highlights the potential for more mergers and acquisitions in the cement sector, particularly among mid-sized and regional players. The Indian cement market, which is highly fragmented, presents numerous opportunities for larger companies to acquire smaller firms and gain a foothold in new markets. M&A activity is expected to accelerate as firms seek growth through strategic alliances and acquisitions.

Regional Focus: Consolidation efforts are likely to be regionally focused, with companies looking to expand their presence in specific geographic areas where demand for cement is strong. Infrastructure development, government projects, and urbanization are driving demand in various parts of the country, making regional expansions an attractive proposition for firms looking to grow.

Impact on Competition: While consolidation may lead to a more concentrated market, it could also intensify competition among the remaining players. Larger firms with more resources and market reach could dominate pricing strategies and influence market dynamics. Smaller firms may either merge or struggle to compete, leading to a reshaping of the competitive landscape.

Demand Outlook: The near-term outlook for the cement industry remains uncertain, with demand being influenced by factors such as construction activity, infrastructure projects, and government initiatives. The report notes that while urban demand is expected to remain stable, rural demand continues to face challenges due to slow construction activities in those areas. However, the long-term outlook remains positive, driven by ongoing infrastructure developments and real estate projects.

Sustainability Focus: Companies are also focusing on sustainability and environmental concerns. Consolidation can provide larger companies with the resources to invest in green technologies and reduce their carbon footprint. This focus on sustainability is becoming increasingly important, with both government regulations and market preferences shifting toward greener production practices.

Conclusion:
The Indian cement industry is poised for further consolidation in the coming years, driven by rising costs, competitive pressures, and the need for economies of scale. M&A activity is likely to accelerate, with larger firms targeting smaller and regional players to strengthen their market presence. While consolidation offers opportunities for growth and efficiency, it could also reshape the competitive landscape and influence pricing dynamics in the sector.

Continue Reading

Concrete

Cement Companies May Roll Back Hike

Cement firms reconsider September price increase.

Published

on

By

Shares



Cement companies in India might be forced to reverse the price hikes implemented in September due to weakened demand and pressure from competitive market conditions, according to a report by Nuvama Institutional Equities. The recent price increase, which was expected to improve margins, may not hold as demand falls short of expectations.

Key Points:
Price Hike in September: Cement firms across India increased prices in September, aiming to improve their margins amidst rising input costs. This was seen as a strategic move to stabilize earnings as they were grappling with inflationary pressures on raw materials like coal and pet coke.

Weak Demand and Pressure: However, demand has not surged as expected. In some regions, particularly rural areas, construction activity remains low, which has contributed to the tepid demand for cement. The combination of high prices and low demand may make it difficult for companies to maintain the elevated price levels.

Competitive Market Forces: Cement manufacturers are also under pressure from competitors. Smaller players may keep prices lower to attract buyers, forcing larger companies to consider rolling back the September hikes. The competitive dynamics in regions like South India, where smaller firms are prevalent, are likely to impact larger companies’ pricing strategies.

Nuvama Report Insights: Nuvama Institutional Equities has highlighted that the September price hikes may not be sustainable given current market conditions. According to the report, the demand-supply imbalance and weak construction activities across many states could push cement companies to reconsider their pricing strategies.

Impact on Margins: If companies are compelled to roll back the price hikes, it could hurt their profit margins in the near term. Cement firms had hoped to recover some of their input costs through the price increases, but the competitive landscape and slow demand recovery could negate these gains.

Regional Variations: Price rollback might not be uniform across the country. In regions where infrastructure development is picking up pace, cement prices may hold. Urban areas with ongoing real estate projects and government infrastructure initiatives could see a sustained demand, making price hikes more viable.

Future Outlook: The outlook for the cement sector will largely depend on the pace of recovery in construction activity, particularly in the housing and infrastructure sectors. Any significant recovery in rural demand, which is currently subdued, could also influence whether the price hikes will remain or be rolled back.

Strategic Adjustments: Cement firms may need to adopt a cautious approach in the near term, balancing between maintaining market share and protecting margins. Price adjustments in response to market conditions could become more frequent as companies try to adapt to the fluctuating demand.

Conclusion:
The September price hikes by cement companies may face reversal due to weak demand, competitive pressures, and market dynamics. Nuvama’s report signals that while the increase was aimed at margin recovery, it may not be sustainable, particularly in regions with low demand. The future of cement pricing will depend on construction sector recovery and regional market conditions.

Continue Reading

Concrete

Bridge Collapse Spurs Focus on Stainless Steel

Climate change prompts stainless steel push.

Published

on

By

Shares



The Ministry of Road Transport and Highways (MoRTH) is turning its attention to the use of stainless steel in bridge construction to counteract corrosion, an increasing issue linked to climate change. With recent bridge collapses highlighting the vulnerability of existing infrastructure to corrosion and extreme weather events, the ministry is promoting the adoption of durable materials like stainless steel to ensure the longevity and safety of India’s critical transport infrastructure.

Key Points:

Bridge Collapse and Climate Change: Recent incidents of bridge collapses across the country have raised alarm over the durability of current construction materials, with corrosion cited as a leading cause. Climate change, leading to harsher weather patterns and increased moisture levels, has accelerated the deterioration of key infrastructure. This has prompted MoRTH to consider long-term solutions to combat these challenges.

Corrosion: A Growing Concern: Corrosion of structural materials has become a serious issue, particularly in coastal and high-moisture regions. The Ministry has identified the need for a more resilient approach, emphasizing the use of stainless steel, known for its resistance to corrosion. This shift is seen as crucial in ensuring the longevity of India’s bridges and reducing maintenance costs over time.

Stainless Steel for Bridge Construction: Stainless steel, while more expensive initially, offers long-term savings due to its durability and resistance to environmental factors like moisture and salt. The Ministry is advocating for the material’s use in future bridge projects, particularly in areas prone to corrosion. Stainless steel is seen as a solution that can withstand the pressures of both natural elements and increasing traffic loads.

Government’s Proactive Steps: The government, through MoRTH, has started consulting with experts in the field of metallurgy and civil engineering to explore the expanded use of stainless steel. They are considering updates to construction standards and specifications to incorporate this material in new and rehabilitated infrastructure projects.

Economic Considerations: Although the initial investment in stainless steel may be higher than conventional materials, the reduced need for repairs and replacements makes it a cost-effective option in the long run. This approach also aligns with the government’s push for sustainable infrastructure that can withstand the test of time and climate change effects.

Future of Indian Infrastructure: With the push for stronger, more durable infrastructure, the Ministry’s move to adopt stainless steel for bridge construction marks a shift towards building climate-resilient structures. The use of this material is expected to not only enhance the safety and longevity of bridges but also reduce the financial burden on the government for constant repairs.

Industry Perspective: The stainless steel industry sees this shift as an opportunity to expand its market, particularly in the infrastructure sector. Stakeholders are engaging with the government to demonstrate the benefits of stainless steel, advocating for its increased use not just in bridges but across various infrastructure projects.

Conclusion: In response to the growing threat of climate change and its impact on infrastructure, the Ministry of Road Transport and Highways is prioritizing the use of stainless steel in bridge construction to combat corrosion and ensure the long-term durability of critical transport structures.

Continue Reading

Trending News

SUBSCRIBE TO THE NEWSLETTER

 

Don't miss out on valuable insights and opportunities to connect with like minded professionals.

 


    This will close in 0 seconds