Rising diesel and pet-coke prices are a cause of concern for the cement manufacturers who are already battling a subdued demand due to lockdown and Monsoon. Diesel price has increased almost 29% compared with average price of April’21. Current diesel price is up approximately 13% as compared to the average Q1FY21 price. A back of the envelope calculation shows that present diesel price hike should result in Rs 50-60/ton increase in freight costs in for the cement manufacturers.
Pet-coke price too is showing uptrend in recent weeks which has increased in July’20 after the declines seen in May and June’20. However, pet-coke prices are still lower by 13-21% as compared to last year. Reliance Pet-coke price increased to US$90/ton from US$75/ton on 1 June’20. Average price of Reliance Pet-coke was US$90/83 per ton in Q3/Q4FY20. On the whole cement manufacturers may get cumulative benefits of Rs 30-45/ton in Q2FY21/mid-Q3FY21 from lower pet coke prices in May and June’20 in Q2FY21. However, this benefit will get negated in mid-Q3FY21 if pet coke prices sustain at current levels.
Meanwhile, cement prices were up 6% qoq in Q1FY21, with price hikes across regions (4-6% qoq in all regions except the South region where prices increased 13% qoq). Dealers survey indicates that cement prices were down by Rs 5-10/bag in the trade segment in North, Central and Gujarat markets in July’20.