The Swiss Holcim Group, the world’s largest cement maker, may exit India, 17 years after it entered the country, putting its twin listed arms-Ambuja Cement and ACC Ltd, up for sale.
It is believed to have held early-stage negotiations with JSW and Adani Group, among others, to explore their interest levels. Both are recent entrants in the cement sector but have aggressive plans to ramp up.
Adani group has extensive interests in infrastructure projects like port and airports where cement is a critical and key material. Moreover, fly ash emerging from its thermal powerplants can be an excellent and eco-friendly substitute binder in cement manufacture.
Aditya Birla Group’s UltraTech is the largest cement company in India with a capacity of 117 MTPA. Holcim controls Ambuja cement and through Ambuja Cement controls ACC with the two having a capacity of 66 MTPA or 27 percent of the national capacity between them.
Why is Holcim exiting profitable cement biz in India?
Many wonder why Holcim is exiting its Indian cement businesses profitable as they are. After wresting deep cuts from the energy industry, policymakers looking to extend the fight against global warming are increasingly focusing on construction materials and practices as a place to make further reductions. This seems to be the only convincing explanation for its exit. It is being futuristic and has read the writing on the wall.
Holcim has identified specialty building solutions and high-end energy efficient renovations as a key focus in the near future, as part of a global re-evaluation of its sprawling portfolio, which will lead to divestitures of legacy operations. This is part of its Strategy 2025 – Accelerating Green Growth programme that aims for sustainable solutions for the building materials sector.
Significance of cement in overall Group declining
The significance of cement in the overall group is declining compared to ready mix concrete, aggregates, roofing and green building solutions. The recent acquisitions of Malaracky Roofing Products, PRB Group in France, PTB-Compaktuna (PTB), a leading specialty building solutions producer based in Belgium, are all a part of this shift, as has been the $3.4 billion buyout of Firestone Building Products, a global leader in roofing systems in January 2021.
So, it is not as if Holcim is singling out India for its cement exit. It has also exited its Brazilian unit and followed it by selling North Ireland cement operations earlier this year. It plans to move out of Zimbabwe as well. Indonesia, Malaysia, and Singapore are among the regions where Holcim has already off-loaded its stake in the cement business.
Bid to reduce carbon footprint by 2025
Holcim’s exit from its India cement business should be viewed in the backdrop of its strategy to reduce its carbon footprint by 2025. The company aims to cut its cement business to around 35 percent of revenue in calendar year 2025 from 55 percent in 2021. All that it is doing is to exit traditional portland cement that is extremely polluting to manufacture and is turning over the proceeds for investments in manufacturing green, eco-friendly construction materials. It wisely sees merit in not persisting with polluting materials by buying carbon allowances from the market.
It would of course not be all that easy with the price differential between portland and green cement being nearly three-fold. The companies are working on solutions, but buyers are reluctant to pay more.
Polluting gases from cement production
About two-thirds of the polluting gases that come from cement production stem from burning limestone. Kilns are heated to more than 1,400 degrees Celsius (2,600 Fahrenheit), about four times hotter than a home oven set to the self-clean cycle. Inside the kiln, carbon trapped in the limestone combines with oxygen and is released as CO2, the most abundant greenhouse gas. A ton of cement yields at least half a ton of CO2, according to the European Cement Association.
What comes out of the kiln is called clinker, the key raw ingredient of cement. It’s the substance that, when mixed with gypsum and water, binds with gravel to harden and form concrete. Many companies are working to cut the amount of clinker in their cement, which requires new and sometimes untested material. Others are looking at substitutes. Those include fly-ash, which comes from the chimneys of plants that burn coal, or slag from steel-making blast furnaces. They trigger a chemical reaction and form what’s known as a geopolymer binder.
Geopolymer cement has performance advantages and a huge sustainability edge over traditional mixes, according to Cameron Coleman, chief executive officer of Wagners Holding Co., which is based in Toowoomba near Brisbane in Australia.
Brazil is one place making rapid progress, partly because of the availability of raw materials such as pozzolan, a type of siliceous and aluminous material that results in a product with the same technical properties as the traditional cement. Clinker then has been conclusively identified as the villain of the piece, accounting for 7 percent of global carbon emissions, much more than what all the trucks in the world emit.
Critics in India seem to be looking for India-specific motives for Holcim exiting whereas it is clearly dictated by its enlightened futuristic green strategy.
(S Murlidharan is a veteran columnist and tweets @smurlidharan. Views are personal)
