The Hindu Business Line : Cement import: Port-level bottlenecks major hurdle

Kolkata April 5 The Government has exempted the import of Portland ordinary cement from the payment of countervailing duty and special additional duty, with the result the price of a bag of imported cement should now drop by about Rs 32 to Rs 210 as against the national average retail price of Rs 218. Direct imports by users would now cost even less, around Rs 180 per bag as against Rs 200 per bag for bulk consumer in certain markets, for example, in Chennai. However, the high shipping freight and port-level bottlenecks, according to analysts, can make all the difference.

The tight demand-supply situation in global shipping, it is felt, could render cement import costly. The imports will be in either Handymax or Handysize vessels and the current spot market is around $30,000/day for Handymax and around $26,500/day for Handysize ships. Even at these rates getting ships might not be easy as cement is not a preferred commodity to shipowners due to several reasons.

First, it takes a relatively longer time to load and discharge cement. Which means the cost of waiting will be added to the freight rate.

Second, precisely for the same reason, the port infrastructure is critical for loading and unloading of cement.

Third, cement sticks to the ship's hold and due to condensation may form lump, which is unwelcome to the shipping lines.

Fourth, physical properties of cement result in loss of weight, and, finally, cement attracts penalties for raising pollution concerns. It is unlike coal and iron ore, which can be sprinkled with water.

Freight Rates

In a heated dry bulk market, no shipping company, therefore, will place its vessels for loading cement unless there is a premium in it. At present, the freight for transporting coke from China to India is around $38 /tonne and that for coal from Indonesia to east coast of India around $21-22/tonne. In such a situation, a shipping company will carry cement only if it gets substantially higher rates. The countries from where the imports can be sourced are Indonesia, Thailand, Philippines and Malaysia.

Infrastructure

A major hurdle to cement import is the infrastructure bottleneck in Indian ports. The minimum economic parcel size in cement import is 25,000 tonnes and not all the ports are ideally suited for handling such volumes.

Each of the five ports being considered for the purpose, namely, Haldia, Paradip, Visakhapatnam, Chennai and Mumbai, has its own problems - poor draft, limited mechanisation, delay in evacuation, labour problems, the list can be long.

Regulatory issue

Finally, the regulatory issue. The cement import will require BIS approvals for quality and such approvals might take time to obtain.

According to indications available, the approvals might be available around June/July, the thick of monsoon, when the import will not be possible either on the east or west coasts.

In other words, it may be another six to seven months before the imported cement becomes available in the market.