Coal diversion to hit India cement makers

Coal diversion to hit India cement makers
Published: 18 October 2011

India’s cement makers will be hurt by Coal India’s decision to divert coal to fuel-starved power producers in October, forcing the cement companies to shift to high cost imported coal, says Emkay Global. Coal India has said it will offer the entire quota meant for electronic auction this month to power companies.

Cement companies procure 20% of their coal requirement from e-auctions. The house notes, the landed price for the imported fuel stands increased due to the sharp depreciation in the INR vs the USD. It adds, assuming the problem of coal shortage persists until December, the 2011 earnings per share for ACC and Ambuja Cement could be hurt by 1.2% each while that of UltraTech Cement could be hit by 4%. "We believe the continued shortage of domestic coal could disrupt (cement) production schedules which in turn would impact the cement dispatches," the house says.