Binani to double cement production as industry heads for overcapacity
October 26, 2009
Amid fears of overcapacity in the Indian cement sector in 2010 and 2011, Binani Cement Ltd is planning to double its production capacity to 15 million tonnes (MT) by 2013 on expectations of good demand from infrastructure and housing as well as from newer markets like Sudan, Africa and Bangladesh.
“Our total cement production capacity is around 6.5MT. We expect total cement making capacity to more than double to 15MT per annum over the next two years, with the commencement of our grinding unit in Dubai in November and planned capacity expansion in China, Mauritius and Gujarat,” said Vinod Juneja, managing director, Binani Cement.
Binani had committed investment of $114 million for its China expansion, out of which it has already invested $74 million. The company plans to raise the remaining $30 million from the markets through bonds, Mr Juneja said. The company would be spending about $90 million for capacity expansion at its Dubai-based grinding unit that is expected to start next month.
The company expects good demand from infrastructure and housing, especially the low-cost homes and sees some correction in cement prices in India. The company expects huge demand for cement from infrastructure projects like metro rail, mono rail, highways, bridges and housing sector, especially from the northern region.
“With the infrastructure sector and the housing sector, especially the low-cost housing sector progressing well, cement will be consumed in this country. There will be a price correction, which is already happening right now,” said Mr Juneja.
Binani Cement plans to export to newer markets like Sudan and Bangladesh. Mr Juneja said that the company would use its facilities from China and Dubai to cater to these newer markets.
With coal imports becoming a vital issue for all Indian cement companies, Binani is gearing to secure its coal supply by investing around $15 million in some coal blocks in Indonesia, through a wholly owned subsidiary formed in Singapore. The company expects to get around 30% of its total coal imports from Indonesia. However, with Indonesia planning to cap its coal exports, some experts are wary about the timing and Binani’s investment plans for coal imports.
However, Binani officials continue to be speculative about the implications of the new proposed coal exports law in Indonesia on their coal blocks. The company expects the new law not to have any adverse effect on Indonesia’s coal exports as he feels that the country needs foreign exchange which it can realise through coal exports.
Mr Juneja, however, said, “We are trying to find out the implications of the new, proposed Indonesian mining laws on our planned coal blocks.”
For the second quarter to end-September, Binani Cement reported a net profit of Rs1 billion from Rs268 million on higher sales, better price realisation and reduced fuel cost. During the period the company’s total revenues increased to Rs4.3 billion from Rs3.1 billion, same quarter a year ago.