Brokerages Divided On How Much Cement Makers Will Gain From Pet Coke Relief
Brokerages were divided on the impact the Supreme Court judgement lifting ban on pet coke use would have on the costs of cement makers.
The apex court yesterday allowed the industry to use the highly polluting fuel. That eliminates the risk of higher costs and a potential pan-India ban, said Morgan Stanley.
Macquarie said the relief would be limited. Costs will rise 2-3 percent against the 6-7 percent projected earlier as it is still uncertain whether the ban is lifted just for pet coke usage in kilns (clinker making) or also captive power plants, the brokerage said. The proportion of pet coke used in kilns is higher than in power units.
Kotak Institutional Securities said in a report that the industry’s costs have been rising with or without the restriction on pet coke. It expects another year of downgrades in earnings estimates.
A ban would have substantially restricted the availability of pet-coke. Moreover, pet coke used by oil refiners could worsen supply, the report said. Reliance Industries Ltd. is looking to commission a 10 million-tonne a year pet coke gasification plant.
India consumed about 23.6 million tonnes of pet coke in the year ended March. Of that, about 12.8 million tonnes came from domestic production. Morgan Stanley said imports contribute 57 percent of pet coke consumption in India.
The risk of a ban is low now given the top court's latest ruling, it said.