Cement companies witnessed speculative support from investors through FY23 amid hopes of a rebound. After capex announcements in the FY24 Budget, there was further interest due to expectations that government expenditure would boost earnings, besides a generic macro-recovery.
Cement earnings were under pressure in FY22 and FY23 due to high raw material and fuel costs; muted demand prevented them passing on the higher cost. Fuel prices are now moderating, which may reflect in earnings of cement companies going forward, once high-cost inventory is mopped up.
Imported coal prices have corrected 45-60 per cent in the past six months and petcoke prices have corrected 23-35 per cent. Petcoke import prices have eased by over 30 per cent and domestic petcoke prices are also likely to reduce further, since these are at a premium to imports. Indian Oil Corporation already cut petcoke prices by 11 per cent in May 2023 over April 2023.
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