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Cement corporations did comparatively higher than expectations in the Juen quarter owing to price financial savings. But latest will increase in sure costs don’t bode nicely for cement producers.
The worth of key input materials petroleum coke (pet coke) has not too long ago began to rise. In August, worldwide pet coke costs elevated sharply by 31% on a month-on-month (m-o-m) foundation to USD83/tonne, as per Kotak Institutional Equities. Domestic pet coke costs too elevated by 8% m-o-m in August to ₹7,275/tonne. Also, the worth of imported coal has began to inch up, it was up round a p.c in August at USD55/tonne, the Kotak report mentioned.
Analysts say, pet coke costs are unlikely to see a run-away rally to their earlier excessive ranges of past USD100/tonne. However, the landed price could proceed to head northwards, due to elevated ocean freight price.
Cement main Ultratech Cements Ltd had talked about in its newest earnings convention name that, at occasions, ocean freight is nearly 50% of the whole price part when procuring pet coke. The administration of Orient Cement Ltd instructed of their convention name that that they had adequate stock for the September quarter, however anticipate the affect of elevated pet coke price to replicate in its December quarter efficiency.
Analysts additionally warning of elevated input price pressures to begin reflecting from the second half of the fiscal yr. Pet coke stock procured at decrease costs and lag in exhaustion of that stock may briefly profit. As for different input costs, though diesel costs have moderated sequentially in August, they continue to be excessive in contrast to the yr in the past interval. This will weigh on freight costs.
That mentioned, enchancment in realisations can compensate for this rising price pressures. Currently, demand and pricing eventualities are bleak as September is a seasonally weak quarter for the sector. Latest sellers’ channel checks present that costs have corrected throughout India, besides South. Thus, retaining the all-India common cement worth flat at ₹365/bag, in contrast to July. One cement bag weighs kilograms.
Volumes are anticipated to catch-up in the second half of the fiscal yr as demand disruption recedes. However, it stays to be seen if it interprets into greater cement costs. Analysts warning that elevated capability additions, decrease utilisation ranges and cut-throat competitors may cap vital realisations enhancements.
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