Cement companies Endured a tough alternate quarter of the fiscal time when the traditionally low seasonal demand was exacerbated by prolonged thunderstorm rains in utmost corridor of the country. Advanced energy and power costs bloodied the perimeters of cement makers.

Moving forward, the fortunes are anticipated to ameliorate; demand has formerly bettered from October and utmost cement makers have formerly hiked prices of the structure material by Rs 10-30/ bag which will help them buffer the impact of rising input costs.
Pet coke, coal and diesel are the crucial inputs for the sector. According to a Care Conditions report, the prices of these factors, at the end of the alternate quarter, were over by 20 percent, 111 percent, and 21 percent independently from the March situations. Although the companies are seeking for edge to save on costs, it may not be sufficient to completely neutralize the advanced energy and freight costs.

The prices of pet coke soared to Rs per metric tonne in September from Rs/ MT in March. Prices in June 2020 were much lower at Rs/MT.
Cement makers are faced with an acute deficit of coal force, which is largely attributable to an unknown increase in imported coal prices. International/ imported coal prices skyrocketed by further than 100 percent in September from March situations in a development linked to a unforeseen swell in power demand in China, its restriction on import of coal from Australia and reduction in its own domestic product.

Experts say the full impact of rising input costs on the perimeters in FY22 remains to be seen as maturity of the companies had the advantage of lower- cost force of coal which helped them dock the drop in perimeters to some extent in the alternate quarter.

This cost is likely to increase by aroundRs. 175-200 per tonne of cement in the alternate half of this fiscal time.

“ Advanced energy costs ( imported coal and pet coke prices) remain a challenge for all companies. Utmost companies anticipate a energy cost affectation of INR150-200/ t in 3Q and farther cost pressures in 4QFY22, if coal/ pet coke prices remain at elevated situations,” securities establishment Motilal Oswal said in a report

Transport and logistics play a vital part in both manufacturing as well as distribution of cement and are a major cost element for the sector. Due to limited connectivity of railroads in corridor of the country, the assiduity has advanced dependence on road transportation, which is exposed to the vagrancies of oscillations in diesel prices.

The continued increase in diesel prices is likely to impact the cost of product by around Rs 100-110/ MT of cement.

Care Conditions expects the concerted impact of advanced input prices on the product cost of about Rs 275 – 290 per tonne. Due to this, the companies are anticipated to witness a decline in earnings before interest, duty, deprecation and amortization situations, a crucial measure of profitability, to the extent of Rs 100-150 per tonne (200-250 base points periphery impact) in the remaining diggings if the costs continue to trend at advanced situations.
The cement assiduity is anticipated to witness high volume growth driven by a reanimation in demand from both the civic casing sectors as well as pastoral demand and also by the strong government push to structure systems. The Union budget handed for a advanced allocation for structure, affordable casing schemes and road systems to fuel the frugality, which will give important- demanded motivation to the cement assiduity.

“ In FY22, the cement product in India is anticipated to increase by
12 YoY, driven by pastoral casing demand and government’s strong focus on structure development,” said a report by ICRA.
Also, CRISIL Conditions expects that the Indian cement assiduity is likely to add
80 million tonnes capacity by fiscal time 2024, the loftiest in 10 times, driven by adding spending on casing
and structure.

The government had approved an disbursement of Rs crore (
.$16.22 billion) for the Ministry of Road Transport and Highways in the Union budget for 2021-22 and Rs crore ($3.77 billion) were distributed under Pradhan Mantri Awas Yojana.

These systems will give a strong drive to the demand for cement. The sector shall also profit from the pent-up demand due to the halt of new systems because of COVID-19.

The demand instigation is anticipated to be sustained and with the recent price hikes formerly enforced by cement companies, price realisations are also likely to remain firm. There may be further price hikes if the instigation in input costs doesn't yield and also because the assiduity is entering a busy construction season.

As a result, experts anticipate the profitability of cement companies to ameliorate quarter on quarter in the third quarter although some anticipate inflationary trends in construction costs to dock demand

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