Indigenization of Spare Parts and Consumables used in the Cement Industries

1. Indigenization of Spare Parts and Consumables used in the Cement Industries Present by: Chanchal Roy Consultant – Alpha International Management Consultants 28th December 2009

2. CEMENT INDUSTRY – SAUDI ARABIAA Prefeasibility study on the Supply of Capital Equipment, Spare Parts and Consumables for this core sector industry This study covers… • An overview of the Cement Industry • Consumption Patterns, Rise in demand for Cement • Capital Equipment & Process Flows • Spare Parts and Consumables • Brief Study on 3 important Consumables.. - Grinding Media - Liners - Refractory • Observation and Inferences

3. Cement Industry – Highlights The Cement Industry in KSA is a primary building block for the largest Construction Industry in the GCC. The Saudi Cement Industry accounts for more than 50% of the cement produced in the GCC and it supports the burgeoning Construction Industry which accounts for 8% of the country’s GDP! Starting out with a 0.4 MTPA plant in 1956, the total installed capacity for cement stands at 48 million tons (2009) although the national per-capita consumption of cement is lower than that of the GCC average. Almost all capital equipment, spare parts and consumables that go into this Industry is procured from overseas and this is where an opportunity lies for local Investment.

4. Cement Industry in Saudi Arabia: A Snapshot Total Installed Capacity : 48 million metric tons Total Cement Production Capacity (2009

5. Cement Industry in the GCC & MENA Region Iraq 25 MTPA (90% idle) Syria 7 MTPA Tunisia 7.3 MTPA Kuwait 2.6 MTPA Lebanon 5 MTPA Morocco 16 MTPA Jordan 4.8 MTPA Iran 52 MTPA Bahrain 0.5 MTPA Algeria 15.5 MTPA Libya 5 MTPA Egypt 45.3 MTPA Saudi Arabia 48 MTPA Qatar 4.3 MTPA UAE 29.7 MTPA Yemen 4.3 MTPA Oman 5.1 MTPA Sudan O.7 MTPA Total Installed Capacity for Cement – GCC : 91 Million Tons/Year Total Installed Capacity for Cement – MENA Region : 254 Million Tons/Year (without Iraq)

6. Cement Industry – Consumption GCC wide Types of Cement produced : Ordinary Portland Cement Sulphate Resistant Cement Pozzolan Cement Oil Cement Cement Consumption Pattern incl. Per-capita and Total in Metric Tons (est. 2009)

7. Cement Industry – Demand Supply scenario • Increase in Demand • The demand for cement is all set to increase in Saudi Arabia and the GCC as a whole and a whole lot of factors are driving this increase namely: • The per-capita consumption of Cement in KSA is lower than the GCC average and • much lower when compared to UAE and Qatar… but this scenario is changing • with the Saudi Govt. announcing a large number of Housing projects. Even a 10% • increase in per-capita consumption would mean a 5 Million TPA addition in either • production capacities or Imports. • Lifting of Export ban: Saudi Arabia has one of the cheapest “cost of manufacture” • of OP Cement and export of cement is aahighly viable business idea. • Launching of major Industrial and Economic cities like in Jizan, Rabigh etc., • The Installed capacity for production of Cement is expected to increase from • 90.2 MTPA in 2009 to 115 MTPA by 2011.

8. Cement Industry – Capital Equipment What does this mean in terms CAPEX investment We foresee an increase of 15 – 25 MTPA in the installed capacity for OPC during the next 5 years which would generate a heavy demand for capital equipment… approx budgets for such CAPEX given below. The above figures are for Supply of equipment only and does not include Civil works, Site Installation and Commissioning Services

9. Cement Industry – Main Capital Equipment • What are these Capital Equipment • The Rotary Kiln Process of producing Cement both Dry and Semi Dry process need the following main capital equipment: • Primary Crushers – Hammer or Gyro Crushers for crushing Lime stones • Feeding and Blending Equipment – for preparation of Raw Meal • Cyclones, Pre – heater and Pre Calciners • Rotary Kiln • Coolers – Planetary, Grate etc. • Grinding mills – for Cement • Conveying and Bagging units • ESP and Gas Cleaning equipment • Buildings including EOT Cranes with Clinker crab buckets • Belt Conveyors including Galleries and Trestles • Utility Systems including Water, Compressed Air, Gas and Fuel Oil • Material Handling equipment like Trucks and Dozers • Laboratory and Testing equipment • Other Auxuliiaries

10. Typical OPC Manufacturing Process – Rotary Kiln Process

11. Cement Industry – Main Spare Parts and Consumables The following are the main Spare parts / Consumables that are needed along with an approx consumption norm and total consumption values if proportioned for installed capacities within GCC and the MENA region We will take up and analyze the manufacturing facilities for first 3 consumables which are typical to the cement industry. The remaining 4 are extremely generic and are Industry Verticals by themselves.

12. Cement Industry – Consumption Norms and Market Size We give below the average consumption rates for 3 main consumables in terms of SR/Million Tons of Cement Produced. Converting the above to approx tonnages using avg. market rates

13. Cement Industry – Consumption Norms and Market Size Based on the average consumption figures, we can extrapolate and work out the demand for these 3 items in Saudi Arabia, within the GCC and in the MENA region. * - Installed Capacity for Cement in Million Tons / Annum The above figures are yearly consumption values as spares and consumables only and does not include first fill or demand from new installations.

14. Cement Industry – What does it take to manufacture parts • Grinding Media • Made from Hi Carbon or Alloy Steels, these are usually round balls or cylinders ranging from sizes of 1.5 mm up to 120 mm. • Grinding Media also finds uses in other industrial applications which involves crushing, grinding or polishing. • Manufacturing Process and Facilities needed for Grinding Media • There are various manufacturing routes for Grinding Media namely: • Casting – used for larger sizes and • Forging – used for media that needs specific physical properties at the core • Boll Rolling – very popular technology - used for smaller sizes • Sintering – for non ferrous media • Manufacture of Grinding Media needs a Steel Melt Shop, A Forging unit or a Ball Rolling facility. Additionally you need a Heat Treatment shop and a Grinding unit.

15. Cement Industry – What does it take to manufacture parts Grinding Media

16. Cement Industry – What does it take to manufacture parts Grinding Media Hi Chrome Cast Steel Media Typical Hardness : Surface HRC 58-65 Core HRC 55-60 Chemical Composition : C: 2.15-3.2; Mn: 0.80-1.20; Cr10-26; Mo: 0.4-0.6; Cast Steel Roller Type Media Usual Sizes (mm): Ø16x16, Ø18x18, Ø18x22, Ø20x25, Ø20x30, Ø20x35, Ø22x30, Ø25x25, Ø25x30, Ø25x35, Ø30x35, Ø30x40, Ø35x40, Ø35x45 Chemical Composition for Low Chromium Alloy Steel Castings C: 2.2-3.6 Si: 0.4-1.2 Mn: 0.3-0.8 Cr: 0.5-1.5 Mo: 0-1 Cu: 0-0.6 S: ≤0.1 P: ≤0.1 Microstructure: Pearlite + Carbide 45-50 Chemical Composition for High Chromium Alloy Steel Castings C: 2.0-3.2 Si: 0.3-1.2 Mn: 1.3-2.6 Cr: 11-16 Mo: ≤2 Cu: ≤1 S: ≤0.8 P: ≤0.1 Microstructure: Martensite + Carbide 56-62

17. Cement Industry – What does it take to manufacture parts • Grinding Media • Facility Required • Considering the Market Potential, we would recommend a setting up of a Rolling and Forge based plant for the GCC Market with an annual capacity of around 30,000 Metric Tonsof ball and cylinder media. • A few important parameters would be as below • The project must be setup as a JV with any of the top OEM’s with a buyback agreement for at least 30% – 50% of the annual production. • Additionally “Off-Take Agreements” with 2 or 3 end users must be secured to cover the balance installed capacity • Typical Product Mix must include multiple sizes so that a wider spectrum of Industries could be served. • The project must be built on a “scalable model” with an eye on future expansions in capacity, considering the projected increase in cement manufacturing capacity

18. Cement Industry – What does it take to manufacture parts Grinding Media Key Financial and Resources Data for a new Project

19. Cement Industry – What does it take to manufacture parts Liners Also made from wear and impact resistant Alloy Steels, liners are made from cast steel plates and are shaped as per the Mill designers requirements. The chemistry, physical properties and shapes all vary from Mill to Mill Facility Required Manufacture of Liners need an Alloy Steel Foundry (with an Induction Furnace), a Heat Treatment shop and an automated machine shop. Liners are usually produced as a part of a wider range of similar Alloy Steel castings and therefore a decision on the capacity of such plants must be taken based on a detailed market survey within other industries like Mining, Mineral Processing, Steel, Food, Glass etc. An alloy steel foundry could produce a multitude of products and as such would be a very good investment in the GCC.

20. Cement Industry – What does it take to manufacture parts • Liners • A viable Alloy Steel Foundry could be based on the following configuration: • 2 nos. Induction furnaces (cap 2 Tons each, with 4 crucibles i.e. 2 standby) • Automatic Mould making machines + Manual Mould Shop for larger castings • Fettling, Cleaning and Storage areas • Machine Shop – tailored for the end products • Stress Relieving and Heat Treatment area • The above plant will have an annual capacity of around 30,000 tons of Alloy Steel castings and will cater to a number of industries. • Typical product mix will include Liners for Grinding Mills, Crushers and other Rotary Equipment, Valve castings and other jobbing works • Considering the GCC market for liners to be around 6,000 tons for Liners alone, we would recommend that a plant capacity of 20,000 TPA

21. Cement Industry – What does it take to manufacture parts Liners Traditionally liners used to be made of Manganese Steel Casting, but lately, Chrom-Moly alloys have made their presence and self fixing liners and diaphragms are being used in the industry Liners inside a Ball Mill Various Shapes of Cast Steel liners Cast Steel Diaphragm

22. Cement Industry – What does it take to manufacture parts Liners Key Financial and Resources Data for a new Project

23. Cement Industry – What does it take to manufacture parts Refractory A very important part of any Pyro based industry, Refractories are materials that provide linings for high-temperature furnaces and other processing units. Refractories must be able to withstand physical wear, high temperatures (above 538°C [1000°F]), and corrosion by chemical agents. There are two general classifications of refractories, clay and nonclay. The six-digit source classification code (SCC) for refractory manufacturing is 3-05-005. Clay refractories are produced from fireclay (hydrous silicates of aluminum) and alumina (57 to 87.5 percent). Refractories are produced in two basic forms, formed objects, and unformed granulated or plastic compositions. The preformed products are called bricks and shapes. These products are used to form the walls, arches, and floor tiles of various high-temperature process equipment. Unformed compositions include mortars, gunning mixes, castables (refractory concretes), ramming mixes, and plastics. These products are cured in place to form a monolithic, internal structure after application.

24. Cement Industry – What does it take to manufacture parts • Refractory • A very important part of any Pyro based industry, these are essentially non metallic lining materials within a shell, vessel, pipe or equipment, within which there is heat generated and refractory materials are used to shield the outer casing from the heat. • Facility Required • Refractory manufacture essentially involves • Raw Material Grinding and Blending, • Forming, • Heating or Firing • Final Processing. • A highly versatile product, Refractory Material is used across different industry verticals like Cement, Steel, Petrochemicals, Pharmaceuticals, Glass etc. • The final processing for bricks and castables differ due to the nature of the end product and hence the packaging, storage and logistics need to be well coordinated for a comprehensive manufacturing unit.

25. Cement Industry – What does it take to manufacture parts Refractory

26. Cement Industry – What does it take to manufacture parts Refractory Fire Clay Bricks Fused Magnesia Bricks Magnesia Chrome Bricks High Alumina Anchor Brick Alumina Clay Fire Brick Castable Refractory

27. Cement Industry – What does it take to manufacture parts • Refractory • Typical Project Capacity • There are several factors that need to be considered for a Refractory Manufacturing Project… Most important ones include • Steel Plants, Petrochem Plants have a sizable consumption when it comes to Castable refractory and this must be factored into the capacity. • Refractory Bricks are best sold within a 300 Kms radius as freight then plays an important factor in the cost. • The location of the plant must consider the individual capacities for each type of refractory • Based on the above, we would recommend setting up of mid size Refractory Manufacturing companies with capacities as below: • 200,000 pieces – Brick type clay based refractory + • 20,000 – Tons of castable refractory mix

28. Cement Industry – What does it take to manufacture parts Refractory Key Financial and Resources Data for a new Project

29. Cement Industry – Benefits of local manufacture Why produce locally? Self Reliance – Cement is a core sector industry and self reliance on important inputs is of strategic importance. Value Addition – Localizing inputs increase value addition in the final product Localizing manufacture of various products adds to the GDP of the country and is a major source of employment generation for the youth of this country. Most of the input items listed are used by a multitude of industries and investment in such facilities would help in bringing down the input costs in various sectors. Most Importantly… why buy from overseas when you CAN PRODUCE!

30. Cement Industry – Summary • Observation and Inferences • The Cement Industry in KSA and the MENA region at large is poised for a definite growth within the next 2 – 5 years, driven by increasing population, urbanization and investments in the infrastructure sector. • It is amply clear that even with an installed annual production capacity of over 90 million metric tons, the GCC region does not have a single core sector industry that manufacturers equipment for this sector. • Almost all spare parts and consumables are imported from Europe, SE Asia, China and India. • Our study reveals that the almost all Cement Producers in the region still depend on the Original Plant Supplier for the necessary spare parts and services and very little effort has been made to localize their source. • There is a huge investment potential in the GCC for various support industries, but it would need a lot of support from the Cement Producers, who would have to support such initiatives. • Localizing manufacture of spares and consumables is the way forward for the Cement Industry

31. Thank You!