BL reported that the recent fall in coal prices may bring some relief to the margins of cement companies compared to the preceding quarters. Having taken cues from falling oil prices, global coal prices have corrected by 23% to US$150/t levels from the record high of US$195/t.
The cement industry’s coal consumption is on a steady increase with coal accounting for nearly 15% of the total expenditure of the cement companies. With coal prices having doubled since last year, cement manufacturers reported shrinking operating profit margins in recent quarters, especially as their end prices were pressured by regulatory measures to contain inflation.
The report added that North based cement producers which couldn’t pass on input cost increases to the consumers could be the key beneficiaries of this trend of cooling input prices.
The current correction in coal prices have tracked similar trends in crude oil which after touching a peak of US$147 per barrel on July 11th has drifted down to present levels of US$93. Falling oil and gas prices which have resulted in a shift in usage from coal to the former have moderated coal prices. Falling oil prices could also cut freight costs, anther key element of cost for cement producers.