Cement cos in race to increase capacity with lowest cost producer tag

India’s top cement makers are expected to add more than 200 million tonnes of fresh capacity in the coming years.

With this race to increase capacity, they are competing to do so at the lowest cost possible.
 

Adani Cement, Shree Cement, Dalmia Cement and JSW Cement, each in its recent communication, have laid out plans to aim cost reduction through managing logistics, supply chains, the usage of raw material and energy, and the costs of capital and employees.
 

Dalmia Cement is planning to take its capacity of 43.7 million tonnes per annum to 110-130 million tonnes per annum by 2031.

In its latest presentation last week, the company said it was the lowest-cost cement producer in India and it could add capacity at $40 per tonne.
 

Shree Cement and Adani Cement have similar plans.


 

A senior official of Adani Cement in an earlier interaction with Business Standard said the company would aim at cost leadership. The person said the company would have more savings by doubling its capacity to 140 million tonnes, quoting an added cost benefit of Rs 40-50 per tonne.
 

Shree Cement is yet another company hoping to utilise its low capital-cost advantage. In its FY23 Annual Report, the company noted occasional decisions to air-lift materials had helped it to reduce the time on project execution and save costs.
 

Since the change in promoter holding in September 2022, Ambuja Cement and ACC have cut down on warehousing space.

The senior official quoted earlier said this “optimised 20 per cent warehouses in the closest corridor of 150 km and that has resulted in some very good savings”.
 

The official said a similar rationalisation process would be followed for newer capacities.
 

Long-term tie-ups with raw material suppliers are another measure adopted.
 

Nilesh Narwekar, chief executive officer of JSW Cement, said the company was tying up for its coal and petcoke requirements for the entire year, which helped in attractive pricing.
 

Ravleen Sethi, associate director for CARE Edge, said adopting cost-efficient measures helped cement companies to achieve financial as well as sustainability targets.
 

“Currently fuel costs are volatile and price increases have happened, but their sustainability remains to be seen. Hence players are focusing more on cost reduction and optimisation.”
 

Among other cost measures that Narwekar listed included using alternative fuels and green energy through the waste heat recovery system (WHRS). Over the years, most cement companies have considerably increased the share of alternative fuels and WHRS, leading to both reduced carbon emissions and lower costs.