cement story
By Sagar Tamrakar
CEMENT
INDUSTRY in Nepal
N
epal is enriched with large and small deposits of good cement grade limestone 1. The limestone deposits occur within the sequence of the Lesser Himalayas 2 extending from the east to west. Limestone is by far the most important mineral resource in Nepal, followed by magnesite, marble, lead and zinc. So far, this is also the most economically viable mineral resource. A total of about 1,250 million tons of cement grade limestone is estimated to exist in the country and the existence of at least 224 million tons have been confirmed through drillings and dedicated surveys. Even when only a few deposits are being exploited for commercial production of cement and allied products, limestone still tops the list of the most exploited mineral resources in Nepal.
Despite the abundance, domestic cement production only accounts for 40 percent of total consumption in Nepal, informs Tej Kant Jha, general manager, Udayapur Cement Cement Industries Industries (UCI). He adds, “UCI alone has been fulfilling 25 percent of the total domestic market demand. All other Nepali cement manufacturers contribute about 15 percent of the demand. Imported cement, i mainly Indian, fulfill the remaining 60 h s o J percent. But Ramesh Kumar Aryal, general a y a manager j manager,, Hetauda Cement Industries (HCI) A / e l i chooses to differ. He comments, “In the f o t o h latest scenario, imported cement supplies p s s 70 percent of the market demand.” o b e Needless to say, a good market for cement h t © exists within and outside the country. Aryal 1
2
2
adds, “With inadequate infrastructure and frequent power crisis in the industries, forget exporting, even self dependency in cement production will remain a dream.” The data from the Department of Industries does confirm that cigarettes and beer are the only merchandise whose total capacity utilisation exceeds 50 percent. With the resolution of conflict, a big boost in this industry is likely. The government has promised to invest a lot in infrastructure development – particularly roads, in addition to housing construction and expansion of corporate production facilities. But private sector investment in the cement industry according to the Department of Industries
calcareous sedimentary rock composed of mineral calcite (CaCO3) which upon calcination yields lime (CaO) for commercial use. range of mountains southwards the range of snow capped mountains extending 2400 km east-west along the Himalayan range.
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Limestone deposit map
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.. 10 11.. 11 12. 13.. 13 14.. 14 15. 16.. 16 17. 18.. 18 19.. 19 20.. 20 21.. 21 22.. 22 23.. 23 24.. 24 25.. 25 26. 27.. 27 28.. 28 29.. 29 30.. 30 31.. 31 32. 33.. 33 34.. 34 35.. 35 36.. 36 37.. 37 38.. 38 39. 40. 41. 42. 43. 44.. 44 45.. 45
N ig ig al al e Sind Si ndha hali li Kata Ka tari ri Chob Ch obha har r Bhai Bh ains nse e O kh kh ar ar e Ro ss ss i Jogi Jo gima mara ra Narp Na rpan anii Gandari Gand ari Surkhe Sur khett (Chaukune) Diyarii Gad Diyar Bhumeshwar Bhumesh war Chauraha Chau raha Kajeri (Halch (Halchaur) aur) Chuladhun Chula dhunga ga Ghyampethumka Ghyampet humka Walin aling g Beldand Beld anda a Kakaru Kak aru Sarada Sara da Lakharpa Lakh arpata ta Supa Su pa Balthali Baltha li Nandu Nan du Bhatte Bhat te Dand Danda a Mane Man e Nigure Nigu re Lamatar Lama tar Halesi Hale si Kurichaur Kuric haur Badhare Badha re Khola Kerabari Keraba ri Bhardeo Bhar deo Majuwa Majuw a Bhartapur Bhart apur Khanchi Kha nchikot kot Sabdu Sab du Mauwa Khola Tamor River Tankuwa Khola Dhankuta Dhan kuta Khol Khola a Khalung Khal ung Khol Khola a Neupane Neupa ne Salendand Salen danda a
Source: Mineral Resources Division, Department of Mines and Geology, July 2003
Cement grade limestone reserves in Nepal and usage Bagmati Zone Lalitpur District Chobhar: Himal Cement Company (a 130,000-Mt/yr cement plant but has closed down with 15.3 million mt of proven reserves) Dhading District Jogimara and Beldanda areas: Hetauda Cement Industries, Tribeni Cement and Annapurna Cement
Narayani Zone Makawanpur District Bhainse-Dobhan, Majuwa and Okhare: Hetauda Cement Industries (a 260,000-Mt/yr cement plant with 18 million mt of proven reserves of limestone) Sagarmatha Zone Udayapur District Sindali: Udayapur Cement Industries (a 270,000-Mt/yr cement plant with 70 million mt of proven reserves) Koshi Zone Dhankuta District Nigale, unexploited Proven reserve: 10 million mt Bheri Zone Surkhet District Chaukune, unexploited Proven reserve: 31.5 million mt Source: Ministry of Industry, Department of Mines and Geology, Kathmandu
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cement story
CASE ANALYSIS does not indicate the expected boost but limestone from other mines to produce Udayapur Cement Industries general manager rather a decline. Companies register but quality cement.” fail to operate either due to government Tej Kant Jha indecisiveness and negligence or their Grade of Cement Factory-running scenario own inabilities. Jha comments, “Even after Grade of cement only indicates the The factory is profitable and expanding in approval from the Ministry of Industry, compressive strength of cement (not terms of capacity utilisation, production and Commerce and Supply, new projects are concrete) at 28 days. But cement turnover. Capacity utilisation has risen over 42 still lost in a bureaucratic maze trying to continues to increase in strength beyond percent from around 35 percent in the previous coordinate with agencies like the 28 days, with not much difference in long four years. Promotion of staff, which had been pending since 10 years, have been made. All Department of Road, Department of Forest term strength. the factory staff have been made permanent. and other related departments,” and adds, Required compressive strength of The total employee count of the factory is 602 “Mineral regulation will be efficient if such various grades of Ordinary Portland with 184 in the administrative section and 418 hindrances are removed once the Cement (OPC) in technical division. Department of Mines and Geology leases 33 Grade 43 Grade 53 Grade Minimum compressive strength in the land for exploitation.” Aryal further Age Capital investment Newton per square millimetre suggests, “The government should offer The financing of the industry was covered Three days 16.0 23.0 27.0 time bound license to private companies by Japanese OECF assistance of Rs 9.84 billion Seven days 22.0 33.0 37.0 so that they are motivated to operate granted to the government during its 28 days 33.0 43.0 53.0 within the time frame,” and emphasises, establishment. The assistance is provided by “The government should support the Annual total cement production and the government to UCI as a loan. Also, the government has equity share of 450 million company by eliminating hassles.” capacity usage percent rupees in the industr y industr y.. The industry is i s paying 644325 ) 700 – back the loan with annual interest rate of five 613643 Market Research n 610044 o t percent. With the rise of foreign currency c 600 – The market for Nepali cement is very i r t exchange rate of the Japanese yen, the amount e good. All the cement stock sells easily for m 500 – payable is also rising. Had the exchange rate n o i they are good in quality and competitively l l i 400 – been constant, the loan would have been m priced as well. Jha says, “The limestone ( cleared by this time. n o quality is also superb. Calcium oxide (CaO) i t 300 – c u content ranges from 43 to 53 percent d Total To tal mineral min eral reserve o 200 – 151681 r P and Magnesium oxide (MgO) content is t UCI has limestone reserves for 150 years at n e 100 – 49% 39.72% 41.71% 41. the rate of producing 800 metric ton (mt) of less than three percent. Therefore, m e clinker a day. The factory is capable of producing cement quality is the best in market.” The C 0 – Fiscal 1 9 8 6/ 8 7 standard content of CaO in cement grade Year 20 0 4 /0 5 2 0 05 / 0 6 2 0 06 / 07 277,200 mt cement per year. Annually, 330,000 mt of limestone is required. The total estimated limestone is 42 percent and MgO is five Annual Cement Production reserve of the limestone mine is 72 million mt percent. The ratio of CaO and MgO needs Capacity Usage Percent * which is in Sindhali area of Udayapur district. It to be maintained to enhance the binding * Proportion of production with respect to total capacity of indus try. is 27 kms from Jaljale plant site. Besides this, power of cement. About HCI, Aryal says, Productivity Index clay, silica sand, iron ore and gypsum are required “The quality of limestone in all the mines for cement production. Except clay and silica 2005/ 06 200 6/07 is of cement grade except that of Bhainse. 404.69 424.93 sand, other raw materials are imported from Bhainse limestone has to be mixed with Source: Ministry of Industry Industry,, Department of Industries India. Essential utilities also include fuel (coal, furnace oil), electricity and water. Cement prices per bag in Kathmandu Valley Ceme Ce ment nt Br Bran and d i l Gaida cement aShakti cement p eSiddhartha cement NTrishakti cement
Gorkha cement Bishwokarma cement Jagadamba cement Nirman cement nSatana cement aBuland cement i dL & T 43 grade n I L & T 53 grade
Lafarge cement Reliance cement ACC cement
Fact Fa ctor oryy Pr Pric ice e
Tra rans nspo port rtat atio ion n co cost st
Tot otal al pr pric ice e
380 400 380 385 380 385 390 380
90 60 60 65 65 65 65 65
470 460 440 450 445 450 455 445
440 440 435 465 430 375 430
65 65 65 65 65 65
505 505 500 530 495 440 495
65
(Source: July 2007 Survey, Udayapur Cement Industries)
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Factory capacity and production The estimated total production capacity of the factor y is 277,200 mt of cement c ement per year. This capacity was only met in the fiscal year 2001/2002. 2001/200 2. The production was 45 percent of the total capacity in 2006/2007. Records of the previous three years show that the capacity utilisation then was only around 35 percent.
Taxation The government charges five percent excise duty on imports such as gypsum, coal and iron ore. The government charges excise duty of Rs 5.25 5. 25 per bag and VAT at 13 percent.
Demand and supply With full capacity utilisation, UCI can
contribute in supplying about 60 percent of the market demand. We have not been able to reach this target though. There are certain constraints in our inability to utilise our full f ull potential; these include frequent power failure, load shedding, lockouts, strikes and machinery breakdown.
Measures to curb low output To improve output, many changes have been made. A separate transformer for UCI has been installed. This minimises power failures to a great extent. An adequate spare parts reserve has also decreased the negative effect of machinery breakdown.
peace zones, effort should also be made to declare industries as peace zones.
Environment protection measures To be environmentally friendly in compliance with the mineral law, we have advanced machinery control. Modern machines with electrostatic precipitator (ESP) greatly reduce environment hazards. This technology collects dust that otherwise spreads in the atmosphere creating air pollution.
Contribution to national economic growth
Foreign cement encroachment
UCI paid electricity bills of 150 million Market research tells us that consumers rupees, loan payoff of 200 million rupees, VAT VAT go for Indian cement only when they do not of 87.5 million rupees and excise duty of 10.5 find Nepali cement. W e have always been trying million rupees to the government this fiscal to increase the production to cover larger year. These revenues grow with the growth proportion of the market and lessen the of cement production. And as a commodity, encroachment of Indian cement. But the cement definitely contributes to national aforementioned constraints pull us back. Also, development. due to leakage in the borders, Indian cement enters the market at cheaper prices. Self dependency in cement Nepal has more than enough mineral Declining cement production resources to be self-dependent in cement. Political instability, formation of trade Political instability is the major drawback in unions, frequent change in management and exploiting this rich resource. Also, the incompetent managers are the mains reasons industrial policy must be updated from time for the decline. Political instability has created to time. Currently Currently,, the policy must be revised r evised a sense of insecurity for foreign investors. to attract foreign investors. Foreign investors Private investment has also been grossly are not sure when and if they will be able to discouraged. Just as schools have been declared reap returns. Primary goal should not be
focused on economic growth but political stability. Another drawback in our system is late decision making. According to one door policy, investors long to invest but lack of prompt decisions at bureaucracy levels disinterests them. In countries such as China, India, Thailand, Pakistan, Bangladesh and others, once the license is approved for foreign projects according to the one on e door policy, then and there they sit together and decide everything. Here, even after licensing, different departments keep hindering the operation. Poor labour laws are another drawback. The Ministry of Labour and Social Welfare is focused only on overseas labour law. The ministry is least concerned about formulating appropriate labour laws in the country. Ministers should know their ministries well before they take office.
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Webster University
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cement story
CASE ANALYSIS Hetauda Cement Industries
general manager
Ramesh Kumar Aryal
stand out as a major hindrance. These disturbances, though present, were not as intense in the past. This problem can be partially solved by fulfilling their demands. But again, the factory is closed now not because of raw material but power crisis – low voltage and irregular power cuts. In addition, some machines are not running well. Even with all these setbacks, we have produced 43 percent of total capacity in this fiscal year. HCI has been making profits for the past three years. If all impediments are managed, production strength will be even more than the capacity capaci ty utility realised in previous years. Our debt is gradually being paid back.
Factory running scenario The factory has not been able to utilise its full production capacity. capacity. The output is only around 40 percent of the installed capacity. This inability does not arise from problems with the plant but with short running hours. This fiscal year, the factory production lagged for four months since August due to scarcity of limestone. We excavate limestone from mines at four different locations – Bhainse, Majuwa, Okhare and Jogimara. Some of them are hard to access due to poor road network whereas some have strong opposition from local communities that are demanding higher facilities, way beyond our strengths. Bhainse mine is easily accessible but because of poor limestone quality, quality, we cannot solely depend on it. Disturbances from local communities
The government initially supplied Profits Hetauda Cement Industries with a loan of 10 The profit was Rs 65.7 million in the fiscal billion rupees that it received from Asian year 2061/2062, Rs 24.5 million in 2062/2063. Development Bank. The government has The decr decrease ease was a result of the insurgency. divided this sum into two dividends. HCI pays This year, year, the factory is at marginal profit within interest rate of 10.5 percent and nine percent. the range of Rs 100 to 130 million, although The payback to government this year is 120 exact figures are yet to be calculated. to 130 million rupees. The industry has equity shares of six different ministries. Challenges and plans Power cuts is the enduring problem. We Total available reserve of asked for a double circuit line so that we could mineral resources get power 24 hours a day . They say that power is The total reserve of mineral resources is limited with the fluctuation of the Kulekhani enough for about 20 years in the future, but power plant. Load shedding, voltage drop and the same mine extensions can supply frequent tripping of power all add to our o ur woes. limestone for more periods of time. Frequently tripped power supply even damaged
CEMENT USAGE mind for quite sometime because there is a real need for it. But since this is a new product, people are only slowly getting used to it. Nevertheless the response has been very good, and we have been encouraged. The most difficult thing has been to convince people on prices. It sounds sou nds a little costly, but at the end of the day, it is more cost effective. It eliminates storage space requirement at the construction site and makes construction more efficient. In addition, it prevents noise and dust pollution. The general customers, Panchakanya Group has taken the contractors and even engineers do not initiative to introduce introd uce a new product in the understand this. Many contractors and field of concrete construction, ie, Ready Mix labourers feel that this product is displacing Concrete (RMC). RMC is relevant for big them, but this is not the reality. RMC is important in the valley because construction works that are presently taking earthqu ake prone area. We place in Kathmandu. Pradeep Kumar Shrestha, Kathmandu is an earthquake were also the first to launch TMT steel bars managing director, Panchakanya Group in the country. But just good steel is not (Industrial and Trading House) explains: enough for construction. Good engineering and something good to concretise should also What is the product? Ready Mix Concrete (RMC) is a very new go hand in hand. This is why the idea of RMC concept in Nepal. This product was on our struck us. the boss
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The total installed capacity at the factory is 750 tons or 16,000 bags of cement per day . The annual production becomes 5.2 million bags of cement. Our production target is 60 percent of the total capacity, capacity, ie, 3.1 million bags of cement per year. year. But due to various factors f actors mentioned above, production met only 67 percent of the target. The production this year has been 2. 3 million bags. This is the data of Ordinary Portland Cement (OPC). Some years ago, HCI had been producing Portland Slag Cement (PSC). The production of PSC ceased due to poor supplement of slag, the raw material that comes from steel industries. Even India is having a difficult time getting slag.
Capital investment
EVOLUTION IN
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Factory capacity and production
Production capacity With the two factories, we can produce 400 cubic metres metres of RMC per day, ie, we can cater to 40 small houses a day day.. Transit mixers that deliver RMC have capacity ranging from three cubic metres to six cubic metres. Three cubic metres cover 300 square feet area of construction. We have 12 transit mixers at present. We have factories in two locations, Jadibuti and Thankot so that we can cater to the needs of customers. We are equipped with a lot of transit mixers and other infrastructure.
Clientele Major clients are general households. They are the main sufferers during construction because of space, time, cost and other hassles. Secondly, we are targeting big project sites. We have set an understanding with some of the big contractors, consultants, and we are trying to work closely with building contractors including MK Nirman Sewa and Alliance Insurance,, to name a few. We Insurance We believe that th at this product will pick up market demand deman d quickly. With the rise in building multi-storey houses in the valley, the demand of RMC will also rise. r ise.
RMC placement technology We have different grades of RMC. RMC grade is chosen as per the requirement of the structure of the building. RMC is delivered by transit mixers and placement is done by cranes and/or pumping units. RMC can be pumped up to 30 metres height. In inaccessible gullies,
the kiln and other machineries. Efficiency of the our product. HCI has been using the limestone machineries drops drastically by irregularity in reserves with 43 to 53 percent CaO content power supply. supply. HCI pays the highest h ighest amount for which is not found in Indian cement industries. electricity in the area, so we demand special Even if Indian cement is introduced at cheaper attention of continuous power supply to the prices, people’s first priority will be quality factory.. HCI is helpless in getting adequate power Nepali cement. Nepalis have a good concept factory supply.. NEA maintains that the whole industrial of maintaining standard in building houses as supply corridor in the area suffers the same problems. Nepal is a highly earthquake prone countr y. We are calling on all top users of electricity in the area to shed load in a systematic way in Declining cement production order to get rid of irregular power tripping. Declining cement production is directly Research must be carried out to find proportional to power crisis. Other requisites is quite costly. Therefore, we are planning to optimum sources of power, power, be it coal or other do not have many serious effects as most are introduce another technology for minimising fuels; only this can improve efficiency and imported without much difficulty. pollution. We are preparing documents to get reduce costs. Contribution of the private sector has been reverse air bag house (RABH) equipment which improving gradually although some registered is more effective. It is eco-friendly, easy to Demand and supply parties have still failed to operate. Private handle and equipped with recycling of dust HCI along with other cement industries in companies in Butwal and Arghakhanchi which otherwise would go to waste. Along with this, we are planning minor our country fulfill only about abou t 30 percent of the districts have started cement production via market demand. W e have huge reserves of limestone exploitation, exploitation, which until now was modifications in the overall machinery to cement grade limestone but production is still only done by state owned industries. This improve efficiency and production. Past records very low and consumers have to depend on trend should continue to lessen the import have demonstrated that we can exceed cement from India. Government should of clinker from India. The time bound licensing production of 20,000 tons per month. seriously update its policies and bring the strategy will definitely yield much in the field fi eld reserves spread throughout the country into of cement in Nepal. good use.
OUT OF THE BOX
Foreign cement encroachment
Environmental protection measures
The import of Indian cement has never affected HCI’s market. Indian cement come into use only after HCI runs out of stock. HCI has maintained its production standard, and this is the fact why Indian cement cannot compete with
HCI has been using ESP equipments to produce cement in environmentally responsible manner, but the equipment have worn down and operate now no w at 50 percent efficiency. The retrofitting of this equipment
AVOID HAZARD
The hype of earthquake along the Himalayan range was hot last month. It was an irrational rumour but seismologists from around the world have investigated and predicted high Richter scale earthquakes along the Himalayan range in near future. In Nepal, main cities are located in the high earthquake hazard zones. The government has also been making the people aware of the probable hazard. The government has formulated certain guidelines for construction of earthquake resistant buildings and made people follow them. The major component in construction is concrete that includes cement, sand, aggregates and water. water. Following are the tips ti ps on selection of building materials provided by Structural Engineers’ Association Nepal.
TIPS ON CEMENT USAGE:
•
RMC delivery is done using wheel barrows.
Pros and cons for contractors and labourers
triple washed sand, water and chemicals that strengthen bonding. We provide a guarantee certificate. These are the parameters that ordinary mortars cannot guarantee.
Some labourers and contractors may be displaced. That is the reason why we did no t Cement brands used launch this everywhere. It has been launched We mostly use Udayapur cement. Some on need basis. But it also speeds up local cement is under test. Main objective is construction constructio n work and helps in bringing more to promote promote Nepali cement. In case of scarcity, scarcity, construction construct ion projects. The contractor contractorss have we use Indian brands like Ultratec and JP. more jobs to take. Therefore, they need to change their mindset. Market Competition There is no competition in the market, Difference from other mortars but there is a lot of pain to start something RMC is a proven technology. tec hnology. We are using new. We bear all the pain to educate the the aggregate, sand or water that is tested. We customers and one fine day someone else may use good quality cement, aggregate, double/ take the advantage once the market is built.
Only high grade cement does not increase the strength of concrete. • Grade of cement used should be just higher than the grade of concrete. • Higher grade cement produces more heat of hydration and increases the risk for cracks. • Just the quantity of cement does not increase strength; the water-cement ratio should also be optimum.
NOTE: finishing , but • You can replace switch, bulb, finishing, not the structure (cement, sand and aggregate). The cost of structure is only 30 to 40 percent of total cost. • For good quality of construction you have to pay only 10 to12 percent more. • After addition of water, concrete and/or mortar should be placed at position within three hours. • More water does not give the compaction and leads to porous and weak concrete.
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