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Feature | September 2014

Concrete Business

Once restricted to the major cities, the concept of RMC and concrete batching plant is now extended to Tier-II and Tier-III cities, making its comeback after a sluggish economy.  

The days of processing concrete manually are a distant memory. The new generation concrete batching plants have become a common sight across Indian cities these days. From the residential sector to high-end skyscrapers to a number of infrastructure projects across the country, batching plants are used almost everywhere.

 

However, the recent trends in the market for concrete batching plants have been impacted by the economic slowdown. With several large-scale infrastructure projects either stalled or delayed over the past year, manufacturers have been focusing on the small and medium scale projects in recent times. Despite the slowdown, the number of commercial ready-mix concrete (RMC) plants in the country is estimated to be over 600 at present, and expected to double in another five years time, given the continued impetus to infrastructure development. A report from Crisil expects the demand for RMC to increase at around 14 per cent by 2016-2017.

 

Demand drivers
 One of the key factors that have been propelling the growth of concrete batching plants has been the stricter emphasis on quality control in the last few decades. RMC in India was mostly restricted to the major cities. The concept is now getting extended to Tier-II cities such as Coimbatore, Cochin, Visakhapatnam, etc. In the near future, RMC will also spread to smaller cities.

 

¨The RMC manufacturers are getting more organised with the increasing demand from the construction industry. One of the major reasons is scarcity of labour and builders are now looking for less labour intensive processes with increased speed,¨ says Anuj Goel, Managing Director, KDP Infrastructure Pvt Ltd, an infrastructure and real estate developer. ¨With the increasing demand, we now expect the RMC batching plant industry to be well equipped to supply the products to the huge demand from large projects,¨ says Fahim Parvez, Project ManagerùBuildings & Factories, L&T Construction, an infrastructure major.

 

Most of the RMC plants are located in major cities of India, wherein they contribute around 30 per cent to 60 per cent of total concrete used in these cities. Initially, the plant availability was restricted to the maximum capacity of 30 cubic metres (cm3), which has grown to 360 cm3 today. A number of plant manufacturing companies, which were earlier reluctant, have entered India because of high-infrastructure growth in the last 7-8 years. This has also opened doors for many Indian players to foray into the market.

 

However, as compared to developed countries, the concrete batching plant industry is still at its nascent stage. Nearly 80 per cent of cement consumption is in the form of RMC and 20 per cent in the form of recast. In India, RMC accounts for less than 5 per cent of consumption, and as much as 82 per cent of cement consumption is in the form of site-mixed concrete. While 70 per cent of cement produced in a developed country like Japan is used by RMC business, in India, only around 2 per cent of total cement production is used by RMC.

 

¨The manufacturers of RMC equipment have already built up the required capacity to cater to the current and the future markets in India. But currently, due to lack of construction and infrastructure projects, there is a demand-supply mismatch,¨ says Rajesh Kawoor, Vice President Concrete Business, Universal Construction Machinery & Equipment Ltd, a manufacturer, exporter and supplier of concrete batching plant. Demand for cement is generally driven by real estate and infrastructure structure, about 35 per cent to 40 per cent of the total cement production. The conversion factor for cement to RMC will soon exceed by another 10 per cent. Also, the concrete industry of India is now witnessing a structural shift from site mix concrete to RMC. Increasing awareness towards quality, hassle-free construction, and economic sustainability is resulting in the greater penetration of RMC. However, RMC penetration is still low in India at around 9 per cent as of now. This mainly is due to factors like focus on urban development, infrastructure projects in power, road, ports, railways, irrigation and also the emergence of activities in the Tier-II and Tier-III cities. ¨The government´s increasing focus on infrastructure, and with new projects in road, ports, and airport segments is expected to open new growth vistas for the concrete industry,¨ informs Prabir Ray, Executive President RMC, Key Accounts and Building Products, UltraTech Cement Ltd, a cement major.

 

Sakthikumar VG, Whole-Time Director Operations, Schwing Stetter, a provider of construction equipment, said, ¨We have proved with the deep understanding of concrete technology and construction site requirements. Our efforts now are to develop new models for the future market.¨

 

On-site v/s off-site mixing
 The builders or contractors, who have reasonably big construction projects and sufficient space at the construction site, prefer to put a batching plant on the construction site itself, rather than depend upon any commercial RMC manufacturer to supply concrete. Also, the other most important aspect is the current tax structure. The purchaser has to pay an excise of 2.06 per cent and applicable VAT in the State to buy RMC from the market, so most construction contractors/builders prefer to make concrete at site.

 

According to Rashid Merchant, Associate Vice President Development & Marketing, RMC Readymix (India), ¨Good percentage of construction industry is still operated by unorganised companies who forge invoices and quantities to save taxes. Lack of tougher health & environmental regulations makes it easy for fly-by-night operators to set up plants and carry out seasonal business.¨

 

This practice is more prevalent in the north and east where the construction sites are reasonably large and space is not a constraint. Apart from this, the demand for on-site mixing is due to various reasons like:

 
     
  • Quality: No trust on RMC manufacturer who is producing concrete away from construction sites
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  • Delivery: No trust that the delivery would be made on time
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  • Cost: Site mixing is perceived to be less expensive.
 

For various construction and infrastructure projects, it is always preferable to have more demand for off-site RMC, especially to sustain the quality of concrete in construction. When RMC is delivered by manufacturers, the quality of concrete becomes superior than site-mixed concrete. However, it will greatly depend on the controls and checks exercised at site and at the RMC producer´s plant. Also, there is a considerable wastage of materials on site due to poor storage conditions and repeated shifting of the mixer location. This is prevented if RMC is used. In most cities, the plot area is barely sufficient to store reinforcement steel, formwork, concrete and other construction materials. Using RMC can cause less congestion and better housekeeping on the site resulting in efficient working environment. Obtaining RMC at site can reduce supervision and labour costs which would otherwise be required for batching and mixing of concrete at site.

 

Sluggish market
 Currently, the infrastructure project execution has been declining continuously and projects are being shelved at an alarming rate in the last two years. In addition, there are many large building construction sites, which have dedicated batching plants. Therefore, while commercial RMC may be just about 7-8 per cent of the total concrete consumed in India, the concrete produced by batching is above 25 per cent of the total concrete.

 

One of the main reasons for this lack of growth of RMC lies in the construction practices followed in the country, which are traditionally labour-intensive. Even today, a substantial proportion of concrete produced in the country is volumetrically-batched and site-mixed, involving a large number of unskilled labourers in various operations. The situation is however, slowly changing and a trend in favour of mechanisation/semi-mechanisation in construction is clearly discernible in the urban centres. It is therefore logical that most of the RMC plants are concentrated in these centres. However, we still find a gap in the industry for dedicated organised players working into each area of supply chain management to enhance the delivery standard and improve the ecosystem. Going forward, the exclusive organised player is expected to have assets and knowledge specificity into each areas of operation. On the other hand, being late starters, RMC producers in India have the advantage of adopting the latest-generation plant and equipment, and many of the RMC facilities in India have state-of-the-art plants, with sophisticated micro-processor based controls having ability of accurate weighing and batching, automatic charging, adjustments for moisture compensation, inventory control, etc., besides having a fleet of transit mixers of various capacities, most of these plants possess well-equipped facilities for pumping concrete.

 

Comeback time
 The market for concrete batching plants is expected to bounce back by the end of the year. With the government making its intentions clear about investing an amount to the tune of $1 trillion towards infrastructure development as part of the 12th Five-Year Plan period (2012-17), the growth rate of the market is expected to return to that of the earlier heady days in a few months time. The continued thrust on manufacturing with the setting up of several industrial corridors, IT parks, SEZs, and sector specific industrial parks is also expected to fuel demand. Policy initiatives towards facilitating influx of funds into infrastructure projects are another positive sign. There are also indications that things may at last return to normalcy in the real estate sector soon, lead by the growth of the retail sector, another good sign for concrete batching plant suppliers. While the demand for compact concrete batching plants is expected to continue for a while, it is only a matter of time before the demand for larger models is expected to pick up.

 

Advantages of RMC plant

 
     
  • High in quality
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  • Reduces the issue of space
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  • Helps in timely completion
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  • Helps to reduce pollution
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  • Reduces noise pollution
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  • Modern RMC plants helps in controlling water to cement ratio
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  • High in correct strength and durability
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  • RMC plants store and accurately batch concrete admixtures
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  • Improve properties of concrete in plastic and hardened stage
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  • RMC plants have superior and accurate batching arrangements
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  • than the weigh batchers
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  • RMC plants have superior mixers than the rotating drum mixers
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  • Temperature control of concrete in extreme weather conditions
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  • can be exercised
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  • Encourages mechanisation and new technologies
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  • New materials like micro silica and fibres can be safely used
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  • Improves the rate on supply of concrete in the formwork

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