Ambuja Cements has recently taken up the decision to invest INR 2,500 crore in building cement and clinker carriers for its cement business. A 38,500-ton capacity Handymax cement carrier costs around INR 400 crore to build from scratch. A 9,200-ton capacity clinker carrier will cost about INR 200 crore each. With this investment, the Adani Group will be able to further enhance the logistics operations in its cement business. It will also be able to ensure that the country’s infrastructural growth is well supported. This investment plan will also allow the Adani Group to rise above the controversies associated with the verdict of the US Court on Adani.
The Adani Group’s Recent Deal:
In a deal of around INR 2,500 crore, Ambuja Cements Limited, the cement manufacturing unit of the Adani Group, will place orders to build two cement and eight clinker careers at either the Cochin Shipyard Limited or Swan Defence and Heavy Industries Limited.
A 38,500-ton capacity Handymax cement carrier costs around INR 400 crore to build from scratch while a 9,200-ton capacity clinker carrier will cost about INR 200 crore each.
The shipbuilder and the contract will be finalised in the upcoming 15 days, thereby giving a boost to the Adani Group’s cement business. This is the biggest deal taken up by the Adani Group amidst the ongoing case at the US Court on Adani.
The Construction Of Cement And Clinker Carriers:
The clinker carriers will be odd-sized. They will have a 30m beam, 4m draft, and 150m length. This is going to be the first of its kind in the entire world. The ship’s unique design with a 4m draft will help maximise the cargo carrying capacity. This will also help in reducing the logistic costs for the Adani Group’s business. The global business group will also be able to ensure that the cement manufacturing process can be carried out smoothly without any kind of hindrance at all.
Each of the clinker carriers will carry around 9,200 tons of clinker on one trip whereas the conventional 4m draft vessel is capable of carrying only 3,000 tons per trip. This will help in reducing the logistics cost considerably. If the Adani Group becomes successful in winning the shipbuilding contract, it will become the first order for Swan Defence and Heavy Industries after it acquired the bankrupt shipyard at Pipavav in Gujarat under the Insolvency and Bankruptcy Code (IBC).
The clinker carriers will be called Sanghimax vessels on the lines of Suezmax and Panamax ships. They are mainly called so because they sail through the Suez and Panama Canal respectively. The name Sanghimax has been given as the clinker carriers can enter the channel to reach Sanghi Industries’ 6.1 million tons capacity integrated cement plant which is located in the Kutch area of Gujarat. The Sanghi Industries plant also possesses the capacity to produce 6.6 mt of clinker. It is a part of Ambuja Cements.
How Will The Recent Deal Benefit The Adani Group’s Cement Business?
The shipping channel to the integrated cement plant is said to be treacherous as the ships have been designed to navigate the channel. The water depth at the cement plant’s captive port is considerably low. So, the Adani Group wants to construct long vessels, taking into account the low water depth in the area. This will further help enhance the cargo-carrying capacity. The shipyard winning the contract will acquire an additional 14% of the contract price of the cement and clinker carriers as a subsidy from the government. This is as per the Ship Building Financial Assistance Scheme which has been approved by the Union Cabinet.
The Ambuja Cement currently runs 11 pure cement carriers that are used to ferry cement from the plants to the various consumption areas. As per industry data, water transportation is a lot more affordable as compared to rail and road which is why the Adani Group is constructing carriers that can make use of waterways in the transportation of cement. Using a combination of ships and trucks is a key to Adani Group’s strategy to transport cement door-to-door and also design an integrated and differentiated business model that will be extremely competitive and hard to match by other cement manufacturers out there.
The cement makers mainly use trains and trucks to transport the cement in bagged form. This requires a considerable amount of time. So, by switching to an alternative method, the Adani Group aims to reduce time and also cut down on logistics expenses. It also aims to rise above the allegations of the US Court on Adani.
Why Expand Its Presence In The Cement Sector?
The Adani Group is known for its extraordinary presence in the cement sector. The company became one of the biggest cement producers in India overnight by acquiring Ambuja Cements and ACC. Post that, it took up various other acquisitions in the cement sector including Sangi Industries and Penna Cement. Now the main reason behind the group’s entry into the cement sector has been to support India’s infrastructural boom. As you know, the Adani Group is already one of the biggest players in the cement sector. By further increasing its cement business, it will be able to bring about synergies in its business. The group will also be able to recover from the losses it incurred during the ongoing case at the US Court on Adani.
Conclusion:
By transporting cement through coastal mode, the Adani Group aims to completely change the logistics dynamics of its cement business. It also aims to further take its cement business to new heights and earn enhanced revenue from its business.
