Reality check: Cement stocks under pressure

The Supreme Court ban on usage of pet coke and furnace oil in the States of Uttar Pradesh, Rajasthan and Haryana to curb pollution hammered cement stocks. Stocks of companies such as Shree Cement, JK Cement and JK Lakshmi — which derive about three-fourths of their volumes from these States — were down by 7-8 per cent last week.

Till recently, cement companies have been slashing overall fuel costs by substituting coal with pet coke.

However, with this ban, cement plants in these States will have to go back to importing coal, which will impact their operating margins to the tune of 5-8 per cent.

The bigger risk is that of the ban being extended nationwide — this could lead to a fresh bout of selling across cement stocks.

However, if the cement companies manage to pass on the increased cost to the buyers, they will be able to mitigate the impact of the Supreme Court order.

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