India’s changing aggregates market remains largely positive

Aggregates demand fundamentals will remain robust In India in the medium and long term. However, some existing and evolving factors will influence mineral processing and supporting-equipment acquisition
November 22, 2021
By Partha Pratim Basistha
A flagship Dilip Buildcon aggregate quarry 40kms from Allahabad in Uttar Pradesh
A flagship Dilip Buildcon aggregate quarry 40kms from Allahabad in Uttar Pradesh

The Indian infrastructure sector has been on a steady recovery path following the first national wave of COVID-19 in August 2020. This has led towards rising demand for aggregates processing equipment from highways, rail and other infrastructure contractors, subcontractors, and commercial quarry owners. The release of pent-up new-machine demand is also in evidence in unit sales during August 2021, notably up on August 2020.

Further research by Aggregates Business International has found that acquisitions of crushing and screening units (stationary, wheel-mounted and track) is up in 2021. 2021 purchases of excavators, loaders, rigid dump trucks (RDTs) by major Indian road contractors have risen year-on-year by 20%. The figures include acquisitions by APCO Infratech, PMC Construction, PNC Infratech, Gawar Construction, Dilip Buildcon, and H.G Infra Engineering. Most of these premium contractors also have very strong order books for the next three years.

Mid-level, North India-based contractors like Mundan Construction Company, Ravi Infrabuild Projects, and Balaji Construction have also been active aggregates processing equipment buyers. Purchasing momentum began in March 2021 following India’s second COVID-19 wave and has kicked off again after more modest sales in the June and July monsoon season, when Indian equipment buyers usually delay significant capital investment.

Jhandu Construction management in front of the company’s recently purchased Premiertrak 400 jaw crusher. The model will be used for road construction work in Nagaland state
Jhandu Construction management in front of the company’s recently purchased Premiertrak 400 jaw crusher. The model will be used for road construction work in Nagaland state

Given India’s union and state governments’ commitment to developing transport infrastructure, primarily roads, railways, metro railways and airport projects, aggregates demand is expected to remain buoyant. However, some potential obstacles to sustained sales growth include uncertainty about the continuation of extended payment cycles being made available to contractors and subcontractors by state-owned financial institutions and non-banking, loan-offering financial companies, now subject to India’s new accounting standards. These standards are designed to hedge the risk of loans funding non-performing assets. There is also a prevailing fear of a third COVID-19 wave, which has led to some big construction firms sticking with existing fleets for new project work, rather than investing in the new ultra-efficient and highly productive equipment.

Jaswinder Singh Bakshi, vice president Commercial Finance and head of Construction Equipment Finance at Tata Capital Financial Services, says: “There has been a steep rise in the costs of raw materials like steel, fuel for transportation, labour and staff costs. This has created pressure on the working capital of most contractors, resulting in extended payments. Though most of the projects being developed by state and private agencies have escalation clauses. However, the quantum of the clauses differs, influencing the cash flow situation with the contractors having an impact on new equipment acquisitions.”

“There is no dearth of projects. However, there are delayed payments of at least three to five months following the fallout of the COVID situation and rising oil prices. The delay is both from major contractors like L&T, Ashoka Buildcon, G.R. Infraprojects and directly from some project developers. This has been barring us from new equipment acquisitions on a large scale,” says J.B. Aneja, managing director of AVR Construction Company. AVR is a major North India subcontracting firm, involved in roads, power and irrigation projects. It owns ten Indian Tata 16- and 18m³-body RDTs, and ten 20-tonne class excavators from manufacturers including Tata Hitachi, JCB, Komatsu, and Hyundai.  

D.K. Mishra, deputy project manager, Plants & Machineries at Oriental Structural Engineers, says: “We will go for slower procurement of plants and machineries in 2021. This is despite our very high projects order book. Instead, we will look to mostly execute the projects through optimum usage of our existing equipment fleet.” He adds: “In certain pockets of India where our projects are going on or will be executed, the pace of construction has been slow due to some local issues. There are continued shortages of skilled operators because of the COVID situation. There is also some backlog in equipment services and parts support from OEMs [original equipment manufacturers].”

Oriental is a major Delhi-based construction firm with a very large equipment fleet. It was one of the contractors in the recently completed Eastern Peripheral Expressway mega-project surrounding India’s capital and its national capital region. The company owns Metso and Sandvik crushing and screening plants capable of producing up to 300 tonnes per hour of commercial product. The company’s fleet also includes 600 25-tonne class Ashok Leyland RDTs and close to 50 20-tonne class excavators, including a number from Kobelco and Volvo Construction Equipment.

S.Sreenivas, senior manager, Procurement, at GKC Projects (GKC), a leading South India construction company, says: “We are in the process of disposing of all of our equipment procured between 2009 and 2012. Fifty per cent of the equipment has already been disposed of. This comprises crushing and screening plants, RDTs, excavators, wheeled loaders, concrete and asphalt batch-mix plants and diesel generator sets [used for producing power at work sites and quarries]. We will replenish the fleet based on project requirements to keep ourselves asset light.”

Laying of fresh rail ballast for new tracks between Pipavav port in Gujarat state and the new Western Dedicated Freight Rail Corridor running between Delhi and Mumbai
Laying of fresh rail ballast for new tracks between Pipavav port in Gujarat state and the new Western Dedicated Freight Rail Corridor running between Delhi and Mumbai

GKC owns a 200 tonnes per hour and a 300 tonnes per hour Puzzolana Machinery Fabricators’ crushing and screening plant setup. The plant is working at two quarries leased by GKC to supply crushed aggregates for an 81km stretch of the Raipur-Dhamtari Highway Project in Chhattisgarh state, Central India. For the project, GKC is also deploying three 120m³ per hour India-manufactured Aquarius concrete batch mix plants. GKC also has a fleet of 400 14m³ body Tata 2518 RDTs.

Changing business dynamics, an altered composition of mineral reserves and new regulations introduced by Indian central and state agencies are also becoming major factors that will determine demand for crushing and screening plant, RDTs and other aggregates production equipment.

The Panchami Crushing Zone (Panchami) in West Bengal state, East India, borders the mineral-rich state of Jharkhand. Unfortunately, it is an example of a concentrated aggregates production area that has been hit hard by changing industry dynamics.

Nearly 300 Panchami quarry owners used to operate 70-250 tonnes per hour plants from Indian and global OEMs, producing 50,000 tonnes of aggregates per month. Now, many of the quarries are on the verge of closure. A slowdown in demand means only a few big players, like Mondal Stone Quarry and Panchami Stone Quarry, are continuing their operations. Only a few years ago, 3,500 RDTs would work across Panchami every month transporting boulders from mines to crushing and screening plants, and then moving the crushed aggregates to the next stage of production. Now, there are only 500 at work each month.

A slump in the once highly vibrant real estate construction sector in Kolkata, the capital city of West Bengal, persistent heavy waterlogging in the state’s mines and the state government’s decision to refuse fresh permits for quarry mining is bringing much aggregates production activity to a halt.

Furthermore, the emergence of coal seams in Panchami and the West Bengal government’s desire to prioritise its mining is a key factor behind the crushing zone’s downscaling. The allocation of Panchami coal-block mining contracts is expected to begin soon.

A good number of quarry owners from Panchami have been shifting their operations to nearby Nalhati and Rampurhat, also in West Bengal. “The migration is making Nalhati and Rampurhat major activity clusters. With further licensing happening, the area is expected to be a major demand area of plants and machineries,” says Biswadev Banik, senior sales manager at Suchita Millenium Projects, Volvo Construction Equipment’s dealer in East India.     

Nalhati and Rampurhat are now major aggregates exporters to India’s eastern neighbour, Bangladesh. The country is home to several major, new infrastructure projects including a key bridge build on the River Padma. Aggregates from Nalhati and Rampurhat are exported by rail via Malda and by road through Petrapole on the India-Bangladesh border.

Banik says that good numbers of Bangladeshi contractors and traders have agreed long-term aggregates supply contracts with Nalhati and Rampurhat quarry owners. There are close to 300 quarries at these two clusters, which are deploying Indian-made 80-100 tonnes per hour crushing and screening plants, and 200-300 tonnes per hour crushing plants from major OEMs. Radha Madhav Stones, one of Rampurhat’s big quarry operators, uses Sandvik jaw and cone crushers capable of processing up to 300 tonnes of aggregates per hour.  

A Volvo wheeled loader handling marble blocks at a JK Natural Marbles site
A Volvo wheeled loader handling marble blocks at a JK Natural Marbles site

Given the significant need to create national transport infrastructure to cater for the growing Indian population and rapid urbanisation, which necessitate faster movements of people and goods, there is rapid expansion of road, bridge and expressway projects across India. The Delhi-Mumbai Expressway is a 1,350km long, eight-lane wide (expandable to 12) highway that will connect India’s national capital New Delhi with its financial capital Mumbai. The under-construction Vadodara–Mumbai Expressway has been subsumed into the project. The Delhi-Mumbai Expressway will become the world’s longest expressway on its completion, scheduled for March 2023.

The Mumbai Trans Harbour Link, also known as the Sewri Nhava Sheva Trans Harbour Link, is another key megaproject requiring a huge volume of aggregates. The under-construction 21.8km freeway-grade road bridge will connect Mumbai with Navi Mumbai, its satellite city. When completed, it will be the longest sea bridge in India.

A significant metro railway network expansion is set to benefit citizens in many Indian states. After a prolonged slump, there has also been a recent spurt in real estate construction activities in parts of Maharashtra state, the second most populous state in India, and South India. All these transport and real estate building projects are boosting demand for virgin and recycled aggregates.

Demand for railway ballast is also rising thanks to the Mumbai-Ahmedabad high-speed rail project. Civil works linked to the project are now underway. Meanwhile, work continues on the semi high-speed Kolkata-Delhi rail corridor, the Delhi ring rail-freight corridor, a new airport at Jewar in Uttar Pradesh, and rail-port connectivity projects. Indian Railways has recently completed one major port connectivity project with the new Western Dedicated Freight Rail Corridor running between Delhi and Mumbai and the key Pipavav port in Gujarat state, West India. The project involved complete track renewals and laying new tracks with fresh ballast to cater for the movement of double-stack container freight trains.

Major contractors involved in these mega-infrastructure projects have been buying premium equipment to help meet strict completion deadlines, while maintaining sufficient profit margins.

Akshay Kumar Rai is plant manager at G.R. Infraprojects. The company is a key contractor in the under-construction 340.8km, six-lane Purvanchal Expressway in Uttar Pradesh.   

“[For the project] we acquired nearly 60 Volvo FM 380 RDTs in 2020. We also bought 15 35-tonne Bharat Benz RDTs, and 15 Tata new series Prima and Signa range RDTs. Deploying the Volvo trucks was extremely profitable on a per-tonne and fuel-efficiency basis when transporting soil and granular materials to the site for laying the sub grade.”

Rai adds: “Though the initial costs of Bharat Benz is lesser than Volvo, the trucks are as productive.” Indian construction major G.R. Infraprojects owns close to 1300 RDTs, with close to 400 units working in Uttar Pradesh and the East India state of Bihar.

Buoyed by rising building materials demand linked to an increase in transport infrastructure works, Rajasthan, North India-based marble mine major J.K. Natural Marbles is diversifying its business by starting a granite mining division. “We see growing demand of granite from infrastructure projects like railways, airports and metro. Granite is now being increasingly used in station buildings and platforms and airport interiors due its high durability and aesthetic,” says Vikram Arora, the company’s managing director.  

“To tap this potential business, we have taken a major granite mining block lease at Devgargh, 50 kilometres away from our marble mine at Morwad. We are awaiting environmental clearance from the Rajasthan government to begin commercial mining.” J.K. Natural Marbles is initially looking to mine 8,000-10,000 tonnes of granite per month from Devgarh.

An Ashok Leyland rigid dump truck working at a cement plant in Rajasthan
An Ashok Leyland rigid dump truck working at a cement plant in Rajasthan

To support its expanding business, J.K. Natural Marbles is looking to acquire three Volvo wheeled loaders, six Volvo RDTs and seven Volvo excavators with operating weights ranging from 21-38 tonnes. The new units may be deployed at its Morwad marble mines.

Arora adds: “We have always preferred Volvo equipment due to its higher fuel efficiency, productivity and ability to perform for longer running hours with minimal maintenance.”

Across India, the expansion of integrated Indian cement plants run by major players such as Ultratech, Shree Cements and Emami has led to strong demand for impact and cone crushers, excavators, wheeled loaders (mainly for in-plant material handling), 40- and 60-tonne RDTs, advanced belt conveyors and dust suppression units.

Emerging project needs and site conditions are also key factors in the selection of crushing and screening equipment. Mobile 200 tonnes per hour track-mounted crushers in a jaw-cone and three-deck screen setup are generally preferred by operators in hilly Northeastern India states like Assam, Meghalaya, and Nagaland.

“There are rising project specifications for road projects being developed by the National Highways Authority of India and state agencies that require recycled materials to be used. We have been using track-mounted plants in a major way due to their easy mobilisation and commissioning when crushing milled materials for new roads onsite,” says Rai.

G.R. Infraproject’s equipment fleet includes up to 200, 250 and 300 tonnes per hour crushing and screening plants from major OEMs including Terex Finlay, Powerscreen, Metso Outotec and Kleemann. The company has been increasingly opting for annual maintenance contracts for its plants.

Gaurav Sharma, deputy general manager, Plants & Machinery, at H.G Infra Engineering, says: “Being strictly timebound, commissioners of new road and other transport infrastructure projects are stipulating the usage of highly productive equipment. This necessitates the project contractor to have a younger fleet that delivers a higher return on investment that justify total lifecycle costs. Our new procurement strategy is to select OEMs offering us equipment buyback services at good resale value, while also supporting us in varied project locations through timely parts and maintenance support.” Sharma says H.G. Infra prefers to keep equipment under 10 years, similar to other contractors.

Based on the higher productivity needs and new emission norms, global OEMs have been introducing many new products for Indian customers. Caterpillar and Gmmco, its dealer for South, West and Central India has launched the Hindustan 2021E, BSIV-compliant wheeled loader. The machine is an upgraded version of the Hindustan 2021D model. Tata Hitachi has unveiled the Shinrai Prime, BS IV-compliant backhoe loader and TL 340 prime wheeled loader. JCB India has introduced new 3DX plus and 4DX plus backhoe loaders, and three new wheeled loaders: the 433-4, 437-4 and 455-4, all with new emission-compliant engines.

All these new solutions claim to offer higher productivity. However, there is scepticism among OEMs that higher initial costs of the machines may deter new purchases. Plant owners say that to make full-scale utilisation of the new emission engine-inclusive solutions, there have to be very high levels of pro-active post-sales support from OEMs. G.R Infraproject’s Rai says: “The new machines will be having their higher initial costs and complications. This will require very high levels of dealership training. Critical areas of support will be needed for equipment diagnosis, filter changes and other actions.” 

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