• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Suresh P. Iyengar

Mumbai, Aug. 30 The recent fall in coal prices seems to have provided a much-needed breather to cement companies, but it apparently is not enough to protect the depleting profit margins.

Coal cost for the cement companies is likely to range between $190 and $200 a tonne (cost, insurance and freight) in the second quarter of the financial year 2008, against $170-240 a tonne in the first quarter.

Mr K.C. Birla, Senior Executive President and Chief Financial Officer, UltraTech Cement, said the dip in coal prices was in line with crude oil. Coal was sold at $240 a tonne, when crude oil was quoted at $140 a barrel.

“One should understand that coal was as low as $70-$80 a tonne in the second quarter last year. The production cost has gone up as much,” he added. Production cost escalation for UltraTech works out to Rs 15-20 a bag.

Other cement majors such ACC, Ambuja Cement and Grasim have also reported similar rise in production cost.

On the domestic front, the electronic auction undertaken by Coal India has pushed up coal prices by 30-40 per cent to Rs 1,600 a tonne as the demand has gone up many folds, said another cement company official. Indian coal is of low calorific value compared with imported coal.

Scarcity of alternative fuels, such as diesel, in few regions has not only pushed up production cost but also the logistic costs.

Cement companies are exploring opportunities to acquire coal mines in India and overseas. UltraTech Cement, in consortium with nine companies, has formed Madanpura (North) Coal Company to explore possibility mining possibility.

“The work is in progress and it will take at least three years for us start actual production,” said Mr Birla.

Similarly, four blocks at Bander, Dahegaon, Gondkhari and Khappa in Maharashtra were allotted to JK Cement, Dalmia Cement, Grasim Industries, Gujarat Ambuja, Binani Cement, Lafarge and Shree Cement.

Companies that have been allocated coal blocks on a sharing basis will have to enter into joint ventures to carry out mining activities, said an analyst.

More Stories on : Cement | Coal | Associated Cement Companies Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line