Dalmia Cement, which has a strong presence in South India, is chalking out a new strategy to reduce its coal costs by making high moisture content coal usable for its cement manufacturing process. Amid rising coal prices and shrinking linkages from Coal India, the company plans to cut its coal costs substantially if coal with higher moisture content is used properly.
During the last one year, the prices of imported coal have risen by more than double from US$60/t to US$130-140/t. Due to increase in coal costs along with other raw materials, the input costs per bag of 50kg cement has gone up by Rs 14. However, continuous government pressure to keep prices under check did not let the cement manufacturers hike prices in tandem with rising input costs.
Somnath Patil, group finance director, Dalmia Cement, said, “We are working on projects whereby coal with high moisture content of 30-35 per cent can be used. As a result, we are sure that our coal costs would come down by 25-30 per cent.” The company expects to have the breakthrough very soon, he added. The company hopes that saving on coal front could be more than what is being expected. “Over the two-three months, we should be able to have a firm idea about how much saving can be made on coal front, or whether we can increase it beyond,” said Patil.
In March, Dalmia Cement, entered into a two-years contract with the Australia-based BHP Billiton, world’s largest mining company, for supplying assured coal at a secured price. We will get a supply of 500,000 tonnes annually from BHP. This will help us eliminate the middlemen and their margins, and moreover, it is a little lower than the international coal prices, he added.
Besides, the cement firm is looking out for coal mines in line with its strategy to have a control over rising costs. “We are looking at opportunities for acquiring coal mines overseas that cannot be ruled out,” said Patil. Other cement majors including ACC, Ambuja and Binani, too, have made it clear of buying coal mines in the country and overseas.