Cement firms importing clinker at uniform price

By Rajkumar Mitra

June 26, 2009: Cement companies are importing clinker from all over the world at the same import price, in an example of high level of awareness of purchasers.

Whether it is the modernisation of an old clinker plant or setting up of a new one, it equally affects the capacity of grinding units of several domestic cement companies. In order to meet the demand-supply gap, cement companies are importing clinker.

The cement companies have strategised in such a way that imports from different countries such as China, Japan or Korea, are happening at the same rates. The companies, which are business competitors, are benefiting hugely from this strategy as their cost of production becomes uniform.

As clinker contributes largely to cement cost, a slight increase in clinker cost would obviously affect the market share of the cement companies. Assuming that current retail cost of cement is Rs 4400 per ton inclusive of all taxes and freight charges, clinker costs around Rs 2200 per ton.

Clinker is the base of all variants of cement and is produced by firing limestone with pulverized coal in rotary kiln at a temperature of 1300 to 1800 degrees Celsius through the coal calcination process. This clinker is later grinded in a grinding mill to produce cement of different varieties. The clinker plant is normally located near the source of limestone and grinding plant is located near the demand point for a supply chain advantage.

Portland cement (OPC) is made by mixing clinker with gypsum, while blended cement like Portland Pozzolona Cement (PPC) and Slag cement (PSC) is manufactured by blending fly ash or slag.

To produce 800 kg of clinker, 1.5 tons of limestone and 180 kg (depending on calorific value) of coal is required, a manufacturer said. Again, for making 1 ton of PPC cement, 800 kg of clinker, 50 kg of gypsum and 150 kg of fly ash is required to be grinded. Instead of fly ash, when a manufacturer uses slag, it is called slag cement.

As all cement plants are busy in modernising their existing clinker plant or setting up new cement plants, their grinding units often do not have much to grind and produce cement.

The only option to run their grinding units is to buy cement clinker from domestic sources or import it. With most of the integrated plants using clinkers for their captive production of cement, not much clinker is left to be sold in the open market. Even if it is available it is not of the desired grade, said a top official of Birla Corporation who has both clinker and cement manufacturing facility in India. "We have to import for running our Durgapur based grinding unit," the official said.

A study of the imports at Paradip port showed Birla Corporation, OCL and Ambuja Cement have all imported large quantities of cement clinker in the month of April. The price of imported clinker ranges from Rs 2216 to Rs 2251 per ton, the report revealed.

Sources in OCL India said three to four consignments of 50,000 tons each were imported to cater to their Cuttack grinding unit. The Cuttack unit can manufacture 13 lakh tons of cement per annum. "Till the time the new clinker unit in Sundargarh is not operational, the Cuttack unit has to import to support the clinker requirement," the official said.

For Ambuja cement, their West Bengal based grinding unit was best supported by imported clinker, traders said.

Source: Sourcing Insights