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Indian gypsum demand

Building on a bright future: Indias demand for gypsum in an array of construction materials is outstripping the countrys supply. Sources such as this in Oman could be the answer.

Indian gypsum builds on bright market outlook


his article investigates Indias gypsum demand and supply for the cement and plasterboard industries. According to the various study and research reports (see later) and in view of the upcoming massive infrastructure developments, cement and plasterboard consumption is expected to increase at a rate of 8-10%, and 25-30% year-on-year, respectively. The rising cost of raw materials, such as gypsum and coal, has been putting a heavy strain on the cement and construction industries. As a result, Indian cement and plasterboard companies have had to explore alternative sources of these materials. Recently, in the Indian Union Budget 2011, gypsum was categorised as a critical mineral, and the basic customs duty on gypsum was reduced from 5% to 2.5%. The demand for gypsum comes from its primary roles in the production of Portland cement and plasterboard. Important chemical components of Portland cement include calcium oxide (CaO), silicon dioxide (SiO2), aluminium oxide (Al2O3) and iron oxide (Fe2O3). Therefore, minerals used in the production of Portland cement are low-magnesium limestone, shale, and iron ore. In addition to the three aforementioned minerals, gypsum (around 5%) is normally added to the product as the retarder to prolong the setting time of the Portland cement. Gypsum is also used as a primary raw material for Plaster of Paris and plasterboard. Natural gypsum will remain the primary source of this commodity for decades to come. There is presently no substitute for gypsum in the production of Portland cement.

Zawawi Minerals LLC

indias cement industry is forecast to reach 300m. tpa by 2011, requiring 15m. tpa of gypsum in 2012. But, as Omans Zawawi minerals reveals, consumers of the critical mineral are struggling to find supplies, despite a reduction in customs duty
2011-12 and 600m. tpa by 2020. India consists of over 300 small cement plants and around 130 large cement plants. According to the various research reports and in view of upcoming infrastructure projects, cement consumption is expected to advance at a 10.60% compound annual growth rate (CAGR) during 2011-2014 and thereafter around 8-10% year-on-year, which is anticipated to strengthen long-term investments and the viability of the Indian cement industry. The study has acknowledged that in spite of strong growth, per capita cement consumption is still quite low in India at 156 kg much lower than the global average of 396 kg. This shows a huge growth potential for the Indian cement industry. In the coming years, it is anticipated that growing demand from rural
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Indian cement industry

The Indian cement industry achieved an installed capacity of around 250m. tpa in 2010 and is targeted to reach over 300m. tpa by

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Indian gypsum demand

infrastructural developments will infuse cement production. Moreover, almost all the cement industry majors have either announced their capacity expansion plans or are currently formulating strategies to ramp up production in coming years. The rapidly growing economy and regulatory support encourage the industry players to execute expansion plans. The Indian cement industry has outpaced the growth rates of other prominent industries in the country on the back of factors, such as rising demand from the housing sector, increased activity in infrastructure, and construction recovery. Recent industry developments and the government supportive policies are attracting global cement giants and sparking off a spate of mergers and acquisitions to spur growth. It is expected that the rising demand from infrastructure developments will increase cement production in the near future and transform into increased per capita cement consumption. According to Global Industry Analysts Inc., the world market for plasterboard is projected to reach 102bn sq. feet (9.5bn m2) by 2015. This will be primarily driven by increased construction activity in fast-emerging economies such as China and India, providing the impetus for growth in demand. The present estimated market for gypsum board is 25-30m.m2, with the market for gypsum board in India thought to be growing at an annual rate of 25-30%. The present gypsum sources for India come from local natural gypsum, imported natural gypsum, and by-product gypsum. India produced around 2.5% of the worlds 146m. tonne natural gypsum output in 2010 and has total recoverable reserves of around 238m. tonnes of gypsum, located in Rajasthan (97%) and the balance in Jammu Kashmir and Tamil Nadu. Gypsum is used in India for fertiliser (ammonium sulphate), and cement and plasterboard, with high purity gypsum earmarked for fertiliser use only and low purity material supplied to cement and plasterboard industries. Gypsum mining in Rajasthan is controlled by FCI Aravali Gypsum & Minerals India Ltd and Rajasthan State Mines & Minerals Ltd, with Rajasthan accounting for the majority of Indias gypsum. But, owing to the states location in the north-west of India, the transportation cost is prohibitive for many cement producers located elsewhere in the country, which are therefore dependant on imported gypsum. FCI Aravali Gypsum & Minerals India Ltd has to its credit the exploration and prospecting of 265 gypsum deposits with a reserve of more
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Zawawi Minerals LLC

Natural gypsum mine in the Sultanate of Oman. The region could be a new source of supply for Indias gypsum-hungry markets.

Indian gypsum board industry

Indian cement capacity and gypsum consumption (m.tpa)


Year 2007 2008 2009 2010 2011 2012 2014 2016 2018 2020 Local gypsum 3.09 3.03 3.63 3.65 3.75 4.00 4.00 4.00 4.00 4.00 By-product gypsum 2.60 2.96 3.36 3.36 Estimates 3.36 3.50 3.50 3.50 3.50 3.50 2.00 2.00 2.00 2.00 2.00 2.00 2.89 5.50 8.00 11.75 15.50 20.50 12.00 15.00 17.50 21.25 25.00 30.00 240 300 350 425 500 600 Imported gypsum (Thai) 0.41 0.57 0.88 1.54 Gypsum shortage Gypsum consumed 6.10 6.56 7.87 8.55 Cement capacity 155 167 181 220

Rajasthan gypsum prices and road transportation costs


Ex-mine Ex-mine cost ($/tonne) 75% purity Transportation cost (road) Total cost in USD 8.95 8.95 500 km 8.95 19.66 28.61 960 km 8.95 37.75 46.70 (nearest port) 1,000 km 8.95 39.33 48.28 (nearest port)

Source: market sources

Rajasthan gypsum prices and rail transportation costs


Ex-mine Ex-mine cost ($/tonne) 75% purity Transportation cost (rail) Total cost in USD 8.95 8.95 500 km 8.95 8.43 17.38 960 km 8.95 16.18 25.13 (nearest port) 1,000 km 8.95 16.85 25.80 (nearest port)

Source: market sources

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Indian gypsum demand

than 100m. tonnes. In fact, most of the gypsum deposits in the country owe their existence to Jodhpur Mining Organization. The company, formerly a part of Fertilizer Corp. of India Ltd (FCIL) where it operated under the name of Jodhpur Mining Organization, has gypsum mines scattered in the vast and difficult environment of the Thar Desert, in addition to mines in Jaisalmer, Sri Ganganagar, Bikaner, and Barmer district. Mohangarh mines of FCIL situated in the Jaisalmer district have some of the best qualities of gypsum in Asia. Rajasthan State Mines & Minerals Ltd (RSMML) is one of the premier public sector enterprises of the Rajasthan government. It is the countrys leading producer of natural gypsum and produces about 3m. tpa. This is mined in the heart of the Thar Desert areas where the working conditions are very harsh. The deposits are shallow and scattered over large areas. Most of the land is owned by private cultivators.

By-product gypsum

Around 5m. tonnes of waste gypsum, such as phospho-gypsum and fluoro-gypsum, is generated annually, according to the Indian Bureau of Mines (IBM), with the cement sector consuming around 2.25-3m. tpa over the last three years. Essentially, these quantities are almost constant and cannot increase substantially due to the higher transportation cost. However, the IBM reports that the fluorine and phosphate content of by-product gypsum is considered deleterious. The phosphate content affects setting properties of cement, and fluorine content causes ring formation in the kiln. The limit generally specified for use in cement is a maximum of 0.15% P2O5. Phospho-gypsum is radioactive due to the presence of naturally occurring uranium and radium in the phosphate ore. Phospho-gypsum contains about 1% P2O5, 1% F and 10 to 30 times more radon. None are desirable and as per the US Environment

Protection Agency, phospho-gypsum is unsuitable for sale as common gypsum. Phospho-gypsum is a by-product in the wet process for the manufacture of phosphoric acid (ammonium phosphate fertiliser), generated by the reaction of sulphuric acid with phosphate rock. The other sources of phospho-gypsum are by-products of the chemical industry through the production of hydrofluoric acid and boric acid.

Imported natural gypsum

Indian natural gypsum production, 2001-2010 (m.tonnes) 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Thai gypsum production and export prices, 2001-2010


Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Production 6.53 6.33 7.29 8.00 6.92 8.36 8.57 8.50 8.68 9.98 Exports (m.tonnes) 4.98 4.73 5.33 5.65 5.12 5.65 6.10 6.01 5.70 6.75 FOB price ($/tonne) 11.10 11.44 11.75 11.70 13.52 13.67 14.60 14.87 16.12 16.86 Source: Bank of Thailand

Indian cement producers are dependent on the import of high quality natural gypsum, mainly from Thailand. Other reserves that India could use are in Sultanate of Oman and the distant countries of Australia, Mexico and Morocco. Thailand has proven and probable reserves of 271m. tonnes, but the Thai government is taking steps to increase the selling price of gypsum before stopping exports. Its efforts are based on the result of a study that used Hotellings concept of maximising net present value to calculate the best way of using its gypsum mineral reserves for maximum profit, which found that the Thai government should push its gypsum price up to a level near the estimated future import price of $33/ tonne from the current FOB price of around $16.50/tonne. At a certain point in time, the report recommended that the country should stop exporting its gypsum and devote the remainder of its resources to domestic consumption or face paying higher prices to import foreign, likely Australian, gypsum at prices more expensive than the current Thai FOB selling price in years to come. At present the Thai government has taken steps to stop new mines being opened and to control gypsum exports through quota system, and has also divided the export market into different segments that prevent exporters from expanding into new markets. This has increased the selling price of Thai natural gypsum exports, but not significantly. As mentioned above, on the basis of the study conducted in 2009 by the University of Stirling on Strategies for maximizing the benefit from gypsum mineral resource, the Thai government started implementing the study report recommendations, like increasing the present FOB selling price and subsequently stopping the export of gypsum. The above-mentioned study begins by investigating Thailands administration of its gypsum resources and those of some other leading gypsum-exporting countries for comparison. The principle of sustainable development and its implication to Thailand are presented, together with various computed indicators of sustainable development for the country. The essence of this study is the development of economic models to determine the optimal extraction paths of Thailands gypsum resources based on Hotellings concept of maximising Net Present Value (NPV). The study report adopted four different model cases and found that under all assumptions and all
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Indian gypsum demand

Rajasthan State Mines & Minerals gypsum output (purity up to 75%)


Year 2007 2008 2009 2010 Sales (m.tonnes) 2.85 2.87 3.39 3.00 Ex-mines price ($/tonne) 5.67 6.42 7.52 8.94 Source: Rajasthan State Mines and Minerals Ltd, annual report 2010

Estimated Indian cement capacity expansions, by region (m. tonnes)


Year North Central East West South Total

2010 (A) 2011 (E) 2012 (E) 2013 (E)

59 66 66 67

31 38 38 38

37 43 47 48

41 47 47 52

98 106 118 122

266 300 316 327

Source: CMA, Industry, Ambit Capital Research

scenarios, the Thai government should push up the gypsum price, and eventually stop gypsum exports in favour of domestic consumption. Thailands gypsum reserves have a limited exploitable life, even when considered at a freezing of the current level of demand. Gypsum is categorised as a critical mineral and is the only mineral in this group with a limited proven and probable reserve (271m. tonnes) which is not very big in comparison to its future local demand. In Thailand, the natural gypsum deposits are found in Suratthani, Nakhon Si Thammarat, Phichit, Nakhon Sawan, and Loei provinces. Phichit, Nakhon Sawan (both are in the Central province) and Loei (in North-East province) reserves together 186m. tonnes are far away from the sea port. The gypsum deposits in Loei (around 36m. tonnes) can be classified as marginally sub-economic deposits since they cannot compete on price. At present, the following measures are enforced by Thai government: i) No new gypsum mining licenses will be granted; ii) Export of gypsum is under government control, and non-marketable quotas for export were allocated to all gypsum mines depending on three factors: each mines production capacity, remaining gypsum reserve in each mine, and a share of each mine in the total export of the country in the previous year; iii) In conjunction with the export control measure mentioned above, the government allows the Mining Council of Thailand to divide the export markets into six zones, and only the mining company who used to export to a particular zone will be granted permission to export to that zone. After introduction of these measures five years ago, the gypsum price has improved, but not very much. As mentioned above, the present government policy has not been very effective in its attempt to increase the export price of gypsum. Another drawback of the present policy is that it does not address the future problems when the countrys resources of natural gypsum are depleted. The study report outlines conclusions and recommendations for the Thai government on its gypsum resources. These are that since the aim of
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Indian gypsum imports (2009-2011)


Origin Iran Oman Thailand Iran Oman Thailand Value (m.USD) 13.83 2.46 27.23 April 2010-December 2010 8.56 2.05 18.91 25.72 31.92 26.55 0.33 0.06 0.71 CIF India ($/tonne) 33.96 23.86 26.49 Quantity (m.tonnes) 0.41 0.1 1.03 April 2009-March 2010

Thailand FOB gypsum prices (2011)


Month January 2011 February 2011 March 2011 April 2011 May 2011 Quantity (m.tonnes) 0.72 0.51 0.55 0.63 0.68 Price ($/tonne) 16.57 16.34 16.75 16.47 16.27

the thesis is to propose a strategy involving the administration of a construction mineral resource, the thesis starts by giving a preview of the situation of the construction minerals industry in Thailand. It points out the peculiar uniqueness of Thailands gypsum resource, given that the country is the major source of gypsum supply in the regions of east, south-east and south Asia with almost no rivals. Thailands closest competitor in the region is Australia. As a cheap and bulky commodity, gypsum transportation costs constitute a large proportion of the prices paid by consumers. Therefore, Thailand should have a big influence in setting the gypsum price in the region. In reality, Thai gypsum producers have had almost no power in dictating the gypsum price because of the intense competition by price-cutting among them. Recommendations for the Thai Government include that Thailand should aim to attain sustainable development with regard to the exploitation of its mineral resources by implementing gypsum FOB price increases and eventually stopping gypsum exports. However substantial price increases may go against World Trade Organization (WTO) agreements, of which Thailand is a member, and in this case the Thai government would have only one

option: to stop gypsum exports at the earliest opportunity to take care of the countrys long-term local consumption needs.

Conclusions

The recent Indian Parliamentary standing committee report 2011 on Performance of cement industry recommends that import duty on gypsum to be brought at par with import duty on the final product (cement), ie. 0%. The committee also highlighted the shortage of gypsum in India, therefore, Indias dependence on imports for gypsum will continue. Even though gypsum accounts for just 2-3% of the total cost of cement sales, Indian cement manufactures are likely to face serious issues regarding the availability and cost of gypsum in the near future. They will increasingly be at the mercy of natural gypsum suppliers such as Thailand, which is keen to increase its export prices to meet its own objectives. Other reserves that India could use are in the Sultanate of Oman and the distant countries of Australia, Mexico and Morocco. Contributor: Mr. Ramachandran, chief executive officer of Zawawi Minerals LLC, a wholly owned subsidiary of Zawawi Group, Sultanate of Oman.
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