Cement unlikely to cost more despite coal price hike

Cement manufacturers will not immediately hike prices of the construction material, despite a surge in their input costs due to an 11 per cent increase in coal price by state-owned Coal India (CIL).

Leading players such as ACC, Ambuja Cements, J K Cement and Shree Cement are unlikely to pass on the burden of increased coal price to consumers as the firms are leaving the rates to be decided by 'market forces'. Cement manufacturers depend heavily on coal to power their plants.

"There is no chance of a price increase right now. It will depend on the movement of the market...But because of the move (by CIL), cost of cement production will go up by about 5 per cent," Cement Manufacturers Association President H M Bangur told PTI.

Bangur, who is also the managing director of Shree Cement, however, added that the companies have to decide whether this burden will be passed on to consumers or be absorbed.

The country's largest cement producer ACC said the industry is not a "cost plus" one and prices that the players can realise from the market depend on demand-supply scenario.

"Our ability to pass on such administered cost increase do not depend on our wish to do so, but on market realities," ACC Managing Director Sumit Banerjee said.

He said if at all there is a price increase, it cannot be the same across the country, but will vary from town to town and district to district.

ACC requires about 4.5 million tonnes of coal every year, of which about 55 per cent are linkage coal procured from public sector coal firms, he said adding that CIL's move to increase coal prices may also lead to a surge in the rates of the fuel in open market.

Ambuja Cements also said cement prices are unlikely to be revised upward as demand has fallen, mainly on account of heavy rains at many places last month.

"Prices are declining in South after heavy rains in Andhra Pradesh, Karnataka and other states. It is under pressure in Uttar Pradesh... Also people do not undertake construction activities during festive season...There is slump in demand," Ambuja Cements Managing Director A L Kapur said.

The firm procures 40-50 per cent of its coal requirements from CIL.

J K Cement Group Executive President R G Bagla said the company is unlikely to hike the rates at present as price movement is dependent on market forces.

After a gap of two years, CIL had hiked coal prices by an average 11 per cent last week.