Cement shares trade weak; Shree Cement, JK Lakshmi Cement down over 4%

STOCK MARKET - Shares of cement companies were under pressure with most of the stocks down in the range of 2% to 5% on the BSE.

JK Lakshmi Cement and Shree Cement were down 4% each, while JK Cements, Birla Corporation, India Cements, HeidelbergCement India, The Ramco Cement, ACC and Amubja Cements were trading lower in the range of 2% to  3% on the BSE. On comparison, the S&P BSE Sensex was trading flat at 33,334 at 11:06 AM.

According to media report, Supreme Court (SC) on Friday asked all the states and Union Territories to consider enforcing the decision of the Ministry of Environment and Forest (MoEF) and the Central Pollution Control Board (CPCB) prohibiting the use of pet coke and furnace oil by the industry in Uttar Pradesh, Haryana and Rajasthan.

Due to the ban, companies under our coverage that would be affected negatively if there is a delay in passing on cost increase for shifting to coal are Shree Cement, JK Cement, JK Lakshmi Cement, Ambuja Cements, India Cements and ACC, in that order, analysts at IIFL Institutional Equities said in sector update.

If pet coke is banned across India, then almost all players in the cement industry are likely to be impacted. The international coal price is around 15% expensive on kcal basis compared with pet coke, which would require an increase of around Rs 10 in price per bag.

The brokerage firm indicates an announcement of price increase of Rs 20-25 per bag, owing to the ban. The sustainability of the price increase would be the key to profitability, it added. The companies are likely to appeal against the order as they are complying with the current norms for pollution control, added report.