For more than a century concrete has been the most popular and cost-effective building material in use and could well remain the most comprehensive and useful building material in the foreseeable future as well. The most exasperating aspect of concrete making is mixing of concrete at site which is prone to human mistakes, poor quality materials, improper mixing of raw materials and lack of quality and quantity control mechanism resulting in a substandard construction. Hence the need to adopt RMC in both large and small projects is increasingly felt. Coupled with this awareness, the steady growth of construction industry during the past five years has generated a lot of demand for RMC that in turn resulted in big demand for 'Batching Plants and allied equipments' in the 'Concrete Value Chain'. But with the onset of the slowdown in the East, as a result of the Western financial crisis, the 'Batching Plant' industry is at crossroads, at least in being unsure of the prospects ahead. Hence it becomes imperative to take a look at the Global and Indian scenario to assess the situation and to understand the prospects awaiting 'Batching Plant and allied equipment' manufacturing industry.
Global Government spending and demand: Today the global economy is running a major infrastructure deficit, with the cost of decades of underinvestment now surfacing. This has resulted in a curious scenario where Governments are made to seek redemption through infrastructural spending, while still being financially hard-pressed due to the financial crisis. Recently the Government of Philippines revealed a budget deficit of 4.3 billion pesos (US$91.6-million). But nevertheless, Philippines plans to speed up spending on infrastructure and social services to rescue its economy from global financial crisis. And Philippines is not alone in being afflicted of this paradox of "Infrastructuremania", due to "Recessionophobia". Almost the whole world and its Governments have similar line of thinking and are aiming to create jobs through infrastructure. Thus the value of expected infrastructure investment around the world is growing on a day to day basis, with an estimated $25 to $35 trillion to be steadily poured into infrastructure in the next two decades, by Governments. Why we state all these is because, it is this newfound zeal of Governments in infrastructural spending that is going to goad the demand for ready mix concrete which in turn would fuel demand for Batching plants and associated equipments, globally. According to Benjamin Tal, an economist at CIBC World Bank, "Government's all over the world are buying jobs, and the infrastructure sector is where many of these jobs will be created".
Indian Perspective: The concept of RMC, though widely popular abroad, is yet to gain full acceptance in India. The RMC industry consumes 76 per cent of the cement produced in the U.S, against a mere 5 per cent in India. The RMC industry in India is still lagging behind its Asian neighbors such as Thailand, Malaysia and Sri Lanka. As concrete related activity is highly disorganized in India, structures built using such improper modus tend to deteriorate prematurely particularly when RCC structures gets exposed to adverse environmental conditions. And hence the tendency of resorting to RMC is increasing in most of the projects. In India the growth of the ready-mix concrete business alone is the driver for demand of transit mixers and concrete pumps. Thus with growth in demand for RMC, the concrete equipment value chain that comprises of concrete batching plants, transit mixers, dry bulk tanks, concrete pumps and concrete pavers would become a key market segment. With the growth in urban commercial, residential projects and Government executed infrastructural projects, the demand for ready mix concrete too have been steadily growing and is expected to grow manifold in the next two decades.
Challenges: It is a curious fact that major challenges posed to the 'Batching Plant equipment industry' are directly coupled with problems faced by the RMC industry dealing with the end product. Thus the issues of RMC industry are synonymous to those of the 'Batching plant value Chain'. The foremost issue is that of transportation of RMC with the freight alone accounting 17% of the production cost. While the preferred mode of transport is Road, the service range can be extended to 250 kms, if only adequate road infrastructure with multi lanes is available for hindrance free transport, encouraging the end user with timely delivery and quality assurance. Secondly being a capital intensive industry, the entry of small players is highly restricted and also paves way to a lot of acquisitions and consolidations. With 3 to 4 months of gestation period, the typical cost of a 'Batching plant' runs into somewhere around Rs. 8 to 10 crores, when it comes to the set up of a 100 cubic meter plant with 4-5 transit mixers. This makes investors become jittery, particularly with the lack of adequate demand for RMC, weighing heavily against their decision to invest. Again inconsistent availability and pricing of raw materials like limestone, coal etc., too is a hindering block for the RMC industry. Similarly the ROI of mini 'Batching plants' being far lower and unpredictable than larger plants, small players become discouraged from entry, while the unsure market conditions take its toll by restricting the bigger players from any capacity addition. For Batching Plants instance ACC has deferred its plans to capacity addition during December 2008. The Chief Executive Officer of ACC, Hans Fuchs said, "We have completely put on hold our capacity enhancement for an indefinite period. Due to the credit crunch, demand from developers has fallen drastically. ACC Concrete had planned to invest Rs 600 crore to add 200 plants across the country by 2012. And as of now we will increase our number of plants to 40 from the current 32 and will stop expanding after this," Fuchs said.
Countering Slowdown: In these circumstances it becomes imperative that adequate steps are taken appropriately on a war footing to ward off any further slow down. And Government alone can play a meaningful role in providing the requisite stimulus to the industry. To begin with, injecting adequate liquidity into the system, into targeted areas of infrastructure would be the panacea. Hans Fuchs, CEO, ACC feels that easy home loans are the way out to increase demand in the reality sector. Government has to ensure more spending on new infrastructural projects in an appropriate manner. Again demand determinants viz., Economic growth, Industrial activity, Real estate, Construction activity and investment in Core sectors should be given adequate boost, through fiscal and deregulatory methods. Government also could legislate by making the use of RMC mandatory inside a certain radii of the location of Batching plants. Again appropriate legislation should be made to discourage concrete production at the site as far as possible. Awareness as to the benefits of RMC should be created by wide publicity, while enforcing the Batching Plant operators to ensure quality output.
Technology for growth: Providing better technology to cut capital, maintenance and running costs of 'Batching Plants' and allied equipments should be the mantra for 'Batching Plant' manufacturers. And products that offer better technology is sure to attract the attention of RMC providers, considering the edge they could provide them in cutting costs. For instance Schwing Stetter India offers CP 30 which is fully computerized and offers state-of-the-art features like material in air compensation. The unique selling proposition of the CP 30 batching plant are its ability to achieve the rated output of 30 m3/h as each and every operation of the plant has been sequenced to achieve this output and achieving this with minimum break downs. Thus making it an ideal plant for use in RMC operations and for projects where the down time of the plant is expensive. Similarly Liebherr's Easymix 1.0, the most compact model in its extensive range of batching plants is designed for minimum transport and assembly outlays, and an ideal solution when particular operational flexibility is needed in concrete production. The Easymix 1.0 has been designed as a standard 40" container with CSC approval. The mixing system, silos for the aggregates, the water tank and control room with the latest microprocessor controls are all fully integrated into the container. The only parts to transport separately are the spirit level and cement scale module, the optional loading conveyor for truck mixer and the cement feeding components. The plant is therefore very easy and cost effective to transport. The financial benefits have a particularly significant impact if the plant must be moved frequently for operations on different building sites. Since the container element stands on a steel foundation as standard, no additional concrete foundations are needed for operations. With an output rate of 35 to 40 m³ per hour, the Easymix offers remarkable performance for a plant of such a small size. And such utilization of technology to cut costs should go a long way in attracting prospective entrepreneurs in a big way for sure. Apart from technology pre sales counseling on finance and profitable operation apart from post sales support with a wide network too would be able to sell 'Batching Plants'.
Optimistic aspects: In spite of the multifarious issues, demand for RMC has been steadily increasing in metro cities due to the simple fact that the product does not require storage space, in the space starved urban landscape. While this practical advantage is favoring RMC use,Indian economic scenarios too have some positive signs. Recently Ken Rogoff, an economist at Harvard University opined that if he had to pick one major economy that's not as affected as it might be by the current western economic crisis, he'd choose India. That is because Indian economy relatively is a closed economy. Though this iron curtain has caused slow progress of India towards wealth, in these times of global financial crisis, it has become a blessing in disguise. Apart from this, Indian Government is in a far stronger position in terms of monetary reserves,which is crucial to ward off any slowdown. Against this backdrop comes the fact that Indian firms too are financially strong enough to sustain the onslaught of a slowdown. In fact many an Indian firms were in acquisition spree, even until last year. Indian firm Telcon acquired Serviplem, world's sixth largest manufacturer of transit mixers and in the process acquired superior technology and a manufacturing footprint in Europe and China apart from a distribution network in Europe, the Middle East and China. Though the current slow down is sure to affect the prospects of such acquisition, still the way out of the slowdown being infrastructural spending by Governments world over, makes this proposition good enough in the long run. All put together the Indian Batching plant manufacturing industry can look forward to tide over the current situation, considering the zeal of Indian and world Government to spend on infrastructure in a big way to ward off the crisis.
Doulath Khan M. Mohamed Deputy Editor The Masterbuilder.
