India: falling demand and rising petcoke prices threaten profits

The Economic Times reports that petcoke prices – which have risen by over 36 per cent since the start of the year – are likely to put a squeeze on cement company profits.

This comes on top of the disastrous impact that the withdrawal of higher denomination rupee notes has had on the economy. The Reserve Bank of India’s failure to provide enough new-style notes has had a profound and negative effect in a country where 98 per cent of all transactions are carried out via cash.

An analyst quoted by the Economic Times said: "Builders in urban areas are facing cash crunch. Due to withdrawal of high currency notes, a large part of unaccounted money would not go in real estate and this would result in fall in real estate prices. Given this, urban real estate developers would be cautious in embarking on new construction.

"On the rural side, individuals are struggling for adequate money for daily sustenance due to restrictions on cash withdrawal. In such a situation, the focus of individuals in rural areas would not be on building or repairing houses."

A report from Centrum Capital finds that cement demand fell by 20-70 per cent in November in comparison to the previous month, with southern India seeing the smallest fall. Cement dealers report that they do not expect a major recovery in demand or prices in December.