Cement stocks tank on apex court’s petcoke ban

Our Bureau Mumbai | Updated on January 09, 2018 Published on November 20, 2017

Operational cost to rise by ₹70-190 a tonne as companies are in a bind to shift to coal

Cement company shares tanked sharply on the bourses following the Supreme Court ruling to ban the industrial use of petcoke and furnace oil in Uttar Pradesh, Haryana and Rajasthan.

Further, in a bid to fight pollution, the apex court has requested all States and Union Territories to move towards a nationwide ban on petcoke and furnace oil to power up industries.

The Supreme Court’s environment bench order is expected to push up production cost of cement companies significantly. Interestingly, these northern States account for the bulk of cement production in the country.

Shares of Shree Cement, JK Lakshmi Cement and JK Cement fell by 4-5 per cent to ₹17,523, ₹408 and ₹1,031 on Monday. Other cement makers such Ambuja Cements and UltraTech Cement were down 3.44 per cent and 1.97 per cent to ₹265 and ₹4,193, respectively. ACC was down 3.38 per cent at ₹1,706. Binod Kumar Modi, Senior Research Analyst, Reliance Securities, said cement companies having production facility in the northern region will face significant rise in operational cost as they have no other option but to shift from petcoke to coal, either sourced domestically or imported. The cost push may wary between 15-20 per cent, though price of imported petcoke at $100-105 a tonne knocks off savings spread by 8-10 per cent.

Back-of-the-envelope calculations show that fuel cost will go up by 10-25 per cent and increase the overall operational cost by ₹70-190 a tonne. This will lead to lower Ebitda of 3-6 per cent, he added. It is expected that the North-based cement companies may file a petition with the Supreme Court to implement the ban across the country to bring in a level-playing field, he added.

Published on November 20, 2017
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