India cement price freeze won’t cut coal demand

India cement price freeze won’t cut coal demand
Published: 13 March 2007

Cement makers attending the Coaltrans India coal conference in Mumbai said that they had been willing to cooperate with the government and freeze cement prices to curb inflation which has been fuelled by property boom.

"Cement prices have already doubled during the past year and we are making a good margin at current prices," an executive of one major cement maker said.

"We will continue to see extremely strong demand for cement, especially within India and therefore we will see increasing demand for coal, including imports," he said.

Indian Coal Minister Dasari Rao said in a paper distributed at the conference on Monday that Indian cement output will rise to 251 million tonnes by 2011 from 156 million tonnes currently.

The Aditya Birla group, one of India’s largest cement producers, aims to double its cement production within four years and then double it again within a few more years, all to meet projected domestic demand, a Birla official said. The group includes Grasim Industries Ltd and UltraTech Cement Ltd .

Holcim , which owns Indian producer Gujarat Ambuja, also projects extremely strong growth in domestic cement demand, despite moves to cap prices.

"We will keep needing more and more imported coal for the cement industry. It’s a question of availability and also cost. Domestic supply is just not enough to meet demand but it is also cheaper for some plants to buy imports," a Birla official said.

"South African coal often works best because it is a higher calorific value than Indonesian imports so on a delivered to plant cost basis, it is better value. Also the quality is consistent and we are assured of supply," he added.

Some Indian cement makers have recently begun to seek more South African coal instead of relying heavily on Indonesian imports, Indian traders said.

The comparatively high level of volatile matter in Indonesian coal has caused technical problems at some cement plants, traders said, and these cement makers are seeking more South African material instead, they added.

Gujarat Ambuja’s import coal buying is still driven more by price than by quality, officials at the conference said.

"The plants are more flexible now than they used to be. We can take any origin of coal with a minimum 5,600-5,700kc/kg NAR c.v.," an official said.