Pet coke import ban looms large over cement

Pet coke import ban looms large over cement
20/12/2017 , by , in ALLIED

Even after the Supreme Court lifted the ban on the use of petroleum coke, or pet coke, in cement production, the possibility of imports of the fuel being halted due to environmental concerns looms large.

If the import of pet coke is banned, analysts may cut their FY19 earnings per share (EPS) estimates of large cement companies by as much as 10%.

Pet coke accounts for 60 per cent to 100 per cent of the fuel used by some large cement manufacturers. According to studies, pet coke emissions of greenhouse gases that cause global warming are 11 per cent higher than those produced by coal.

A ban on pet coke imports would exacerbate business prospects for cement manufacturers, hurting their earnings growth while already grappling with weak demand and the lack of sand, a raw material.

Power and fuel account for Rs 750- Rs 900 – or 25 per cent– of the cost of producing 1 tonne of cement. If a ban on imports were to be introduced, it may further drive pet coke prices higher, adding to production costs and capping earnings growth for cement companies. Pet coke prices in the US traded at $105 per tonne in November, a two-year high.

Of the 23.3 million tonnes of pet coke consumed in India, almost 14 million tonnes was produced domestically, while 40 per cent was imported.

In addition, the price of imported coal has been rising, leaving little scope for a cheap alternative fuel that can be used by cement manufacturers.

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