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Are cement companies headed for a change from petcoke to coal?

SC's ban on petcoke will applicable on only those cities of UP, Haryana and Rajasthan that fall under NCR

Avishek Rakshit  |  Kolkata 

cement, cement firms

At a time when the has banned the use of in Delhi and the surrounding areas after hearing a public interest litigation on pollution, the cement sector is headed for a change in its raw material mix. As of now, there is little impact on the sector as no company operates any plant in the National Capital Region (NCR) but in case states like Rajasthan and Uttar Pradesh come up with any such notification, in these states are likely to come under stress. According to India Ratings, such will be applicable only in those districts of Uttar Pradesh, Haryana and Rajasthan which fall under NCR; however if the state governments fail to issue a similar notification, then the will automatically be applied to the whole state. Senior officials from cement firms are unsure how things will pan out in the near future but they have started arranging for alternative fuels. Shree Cement, whose dependence on in the kiln is 100 per cent, is now aggressively bidding to secure linkages from state owned India. Other like Birla Corporation, which recently acquired the cement units of Reliance Cement has also secured its linkages. However, switching from to — either imported or domestic — will considerably up the input costs and hence may result in a price surge. A senior official from the cement sector opined that owing to petcoke's high gross calorific value (GCV), lesser amount of this carbon variant is needed as compared to has a GCV of 7,700-8,000 kcal while imported coal's GCV is between 5,000-6,000 kcal.

It is even lesser for domestic "Thus, if we switch from to coal, volume requirement of this input material would go up by 30-40 per cent", the official noted. R R Ravi, sector analyst with Centrum Broking opined it would translate into costs surging by 15-20 per cent which would effectively translate into a Rs 10 per bag price hike in the wholesale trade. On a cost comparative basis, price is 10-12 per cent higher than imported prices but since its volume requirement is much lower than coal, it is cost effective for the cement makers to use While ACC and Ambuja Cement has kept its dependence on low between 65-67 per cent, the exposure of like Ultratech Cement, JK Cement and to is in the range of 75-85 per cent. Shree Cement's exposure however, is 100 per cent. Nevertheless, over the years, these have tailored their plants to either use or substitute it with and hence, the switchover wouldn't be a problem. Sabyasachi Majumder, analyst with ICRA Ltd pointed out that most of the goes into the kiln to make the cement and is seldom used as a fuel in the manufacturing plants. It is on this conclusion that the Environmental Pollution (Prevention and Control) Authority for Delhi NCR has appealed continuation of in cement plants where these emissions can be controlled. A second analyst from ICRA Ltd opined the switch from to will depend on movement of the international prices and a further 12-15 per cent increase in global prices will lead to cement makers shifting their production line towards Analysts are of the opinion that ultimately, in the long-run, cement makers have to shift over to and the Supreme Court's order will add speed to the switchover.

First Published: Tue, November 14 2017. 18:24 IST