The recent hike in Indian coal prices by 10-15% is expected to hit the cement industry, as the cost of coal constitutes around 12% of total operating cost of cement sector, a top industry official said.
“As per the latest notification, Coal India has hiked the pithead prices of all the grades of coal produced by domestic coal companies with effect from 13December 2007.
The prices have been hiked by 10-15% for various grades of coal. The cost of coal constitutes roughly 12% of total operating cost for the cement industry,” brokerage firm Sharekhan Ltd’s senior vice president Sandeep Nanda said.
“The price hike will have an impact of 2-3% on the overall cost of the cement industry. But considering the buoyant demand scenario expected ahead, cement companies would comfortably be able to pass on the cost increase to the end users through cement price hikes,” Nanda said.
The outlook for the Indian cement industry is buoyant, Nanda said, adding going forward we will witness a rise in volumes as construction activity gains full steam in December and continues its momentum in the fourth quarter as well.
The rising cement demand will push up prices gradually. We have already seen first such price hike effected after the resumption of construction activity post-monsoon in Maharashtra, Andhra Pradesh and Tamil Nadu.
“We also expect cement prices in Kerala to firm up in the coming week. We remain bullish on the diversified cement companies, namely Grasim Industries and Jaiprakash Associates,” he said.