Several large cement making units in India, the world's second largest producer, have shut operations until 31 March to control the spread of the coronavirus. The shutdown may be extended beyond that, which would knock cement output harder and reduce demand for fuel such as petroleum coke and coal.
Operations have been stopped in the north Indian state of Rajasthan and eastern state of West Bengal and the closures are likely to be extended to more states in the coming days, further undermining cement sales. Operations at leading cement producer Ultratech, Shree Cement, Birla Corporation and JK Lakshmi Cement are among those affected in these states. The lockdown in several Indian states is likely to accumulate coke and coal stocks and affected companies may delay making fresh purchases, several market participants said.
The state of Rajasthan, a leading cement producer, issued directives earlier to close all production facilities in the state in order to control the transmission of the virus. Leading cement maker Shree Cement said last night that the company is taking steps to shut all five of its units in Rajasthan till 31 March or until further notice.
Ultratech Cement, the biggest Indian cement maker with plants all over India, said today it had suspended operations at various plants following orders from the authorities at federal and state government levels. A decision on resuming operations would depend on further government orders.
Birla Corporation has temporarily shut its cement manufacturing units and power plants in Rajasthan, as well as its cement making units in West Bengal. The lockdown in various states, including the western state of Maharashtra, Rajasthan, West Bengal and the northern states of Uttar Pradesh, Delhi and Punjab, is expected to affect cement sales. But the financial impact is not yet possible to ascertain, it said.
The sudden disruption to operations came just as the industry was hoping to step up sales before the start of the monsoon season in June. Indian cement demand is usually firm during the first half of each calendar year as developers of real estate and infrastructure projects try to maximise activity before the monsoon season.
Indian cement makers produced 31.4mn t in January, up from 29.9mn t in January 2019, government data show, and 3pc higher than December 2019. Monthly production in August, September and October 2019 all declined on the year, with heavy monsoon rains and slower economic activity weighing on demand from the construction sector. Indian cement output in the 10 months to January 2020 rose by 1.1pc at 278.8mn t, compared with 275.7mn t a year earlier.
Strong demand from the Indian cement industry has kept seaborne coke prices firm up until now. The four-week average delivered price for 6.5pc sulphur coke to India was at $76.38/t on 18 March, according to Argus assessments, up from the four-week average of $72.63/t to 19 February. The firm demand has triggered two consecutive monthly increases in the basic sale price of petroleum coke produced by private-sector refiners Reliance Industries and Nayara Energy.
