High input prices, energy costs hurt cement makers; demand likely to ameliorate in alternate half

Cement companies Endured a tough alternate quarter of the fiscal time when the traditionally low seasonal demand was exacerbated by prolonged thunderstorm rains in utmost corridor of the country. Advanced energy and power costs bloodied the perimeters of cement makers. Moving forward, the fortunes are anticipated to ameliorate; demand has formerly bettered from October and utmost cement makers have formerly hiked prices of the structure material by Rs 10-30/ bag which will help them buffer the impact of rising input costs. rnPet coke, coal and diesel are the crucial inputs for the sector. According to a Care Conditions report, the prices of these factors, at the end of the alternate quarter, were over by 20 percent, 111 percent, and 21 percent independently from the March situations. Although the companies are seeking for edge to save on costs, it may not be sufficient to completely neutralize the advanced energy and freight costs. The prices of pet coke soared to Rs per metric tonne in September from Rs/ MT in March. Prices in June 2020 were much lower at Rs/MT. Cement makers are faced with an acute deficit of coal force, which is largely attributable to an unknown increase in imported coal prices. International/ imported coal prices skyrocketed by further than 100 percent in September from March situations in a development linked to a unforeseen swell in power demand in China, its restriction on import of coal from Australia and reduction in its own domestic product. Experts say the full impact of rising input costs on the perimeters in FY22 remains to be seen as maturity of the companies had the advantage of lower- cost force of coal which helped them dock the drop in perimeters to some extent in the alternate quarter. This cost is likely to increase by aroundRs. 175-200 per tonne of cement in the alternate half of this fiscal time. “ Advanced energy costs ( imported coal and pet coke prices) remain a challenge for all companies. Utmost companies anticipate a energy cost affectation of INR150-200/ t in 3Q and farther cost pressures in 4QFY22, if coal/ pet coke prices remain at elevated situations,” securities establishment Motilal Oswal said in a casing and structure. The government had approved an disbursement of Rs crore ( .$16.22 billion) for the Ministry of Road Transport and Highways in the Union budget for 2021-22 and Rs crore ($3.77 billion) were distributed under Pradhan Mantri Awas Yojana. These systems will give a strong drive to the demand for cement. The sector shall also profit from the pent-up demand due to the halt of new systems because of COVID-19. The demand instigation is anticipated to be sustained and with the recent price hikes formerly enforced by cement companies, price realisations are also likely to remain firm. There may be further price hikes if the instigation in input costs doesn't yield and also because the assiduity is entering a busy construction season. As a result, experts anticipate the profitability of cement companies to ameliorate quarter on quarter in the third quarter although some anticipate inflationary trends in construction costs to dock demand .