Cement Prices Rise With The Shortage Of Coal And Pet Coke
The construction industry, which was already struggling with the pandemic-induced woes, has suffered a fresh blow with a steep rise in cement production cost.
The South India Cement Manufacturers Association (SICMA) said cement production had been hit due to a rise in the cost of imported coal. The prices of imported coal and pet coke were already high. And these days, due to a shortage of ships, even high-priced coal or pet coke is not available, and it is expected that there will be a further increase in the price of coal. Under these circumstances, cement production will likely be badly hit. This could increase the production cost of a bag of cement by a minimum of ₹ 60.
Branded cement was sold at ₹ 420 per bag until last week(as of 13th Oct 2021). At present, the wholesale price of ‘A’ grade cement has already risen to ₹ 480–490, while the retail price is ₹ 490–500. This has sparked alarm among property developers, who feel it could impact the residential sector badly. Builders estimate that real estate prices could rise by ₹ 250 to ₹ 500 per square feet.
With over 180 million tonnes capacity, South India accounts for around half of the country’s installed capacity. About 35 percent of limestone deposits are in the South, and it can be a cement hub to meet the surge in demand in other regions.
According to industry sources, the cement industry has been facing restrictions in the domestic supply and distribution of good quality coal. This has forced the industry to rely on imported coal from the United States and Australia and also on the import of the coal substitute, pet coke. In recent times, there has been an unprecedented increase in the cost of these fuels from $90 (₹ 6780 approx.) per tonne to $170 (₹ 12810 approx.) per tonne.
The ₹ 400 cess (tax) per tonne levied on imported coal and 11 percent additional duty on imported pet coke have added to the cost. The industry wanted the government to consider a rollback of these levies at least till the time imported prices came down to a reasonable level of less than $100 (₹ 7535 approx.) per tonne. But the China coal crisis has added fuel to the fire, with even shortage of ships and coal availability, said industry sources.
S Sridharan, chairman of Urban Development/ Affordable Housing Committee, Confederation of Real Estate Developers’ Associations of India (Credai) National, said the rise in cement prices will bring the construction sector to a standstill, and also customers will be affected.
The construction sector wants govt to intervene and regulate cement prices. Srinivas Anikipatti, senior director — Tamil Nadu and Kerala, Knight Frank, said the rise in cement prices will result in the overall construction cost going up by 2.5 percent. “It will put a strain on cash flow and slow purchases as well as increase the price of unsold units,” he said.
The construction sector will feel the impact as the price of steel and cement has kept on increasing.
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