SC Bans Pet coke

Supreme Court (SC) banned the use of pet coke and furnace oil on 24 Oct’17, in the states of UP, HR, RJ with effect from 1 Nov’17, in order to fight pollution. CoS which are expected to be impacted are Shree Cement, JK Cement, JK Lakshmi Cement, Ambuja Cements, India Cements and ACC, given their usage of pet coke levels, especially in these particular states. As per media sources, if the CoS resort to the international coal (~15% expensive than pet coke) as a replacement to the pet coke, they would require to take a price hike of ~Rs10/bag in order to pass on the burden. CoS have already announced price hikes in the tune of Rs 20-25/bag, however, the key thing to watch is the sustainability of the price increase. Further, cement CoS keep pet coke inventory of ~45-60 days. CoS looking to shift the inventory to other states might have to incur a one-time freight cost. However, SC has requested all states & UTs to move forward towards a nationwide ban on pet coke and furnace oil usage in order to fight pollution. If this ban comes in action, then all the cement companies would have to face the brunt of it, however, production is unlikely to be impacted negatively as most of the cement plants are multi-fuel based and can quickly shift to coal. Moreover, as per media sources, CoS are likely to appeal against the order as they are complying with the current norms for pollution control.