MAC: Mines and Communities

India Cements to own overseas coal mines

Published by MAC on 2007-11-23

India Cements to own overseas coal mines

23rd November 2007

by Abhinaba Das, NDTV Mumbai

Coal prices are on fire and freight rates are soaring. This has made cement makers like India Cements to think of innovative ways to keep their coal costs in check.

India Cements has initiated talks with concession owners in Indonesia to work out long-term coal supply agreements. The company may also pick up an equity stake in Indonesian coal mine to ensure coal supplies at a reasonable price. The company currently imports over 70 per cent of its coal requirements from Indonesia.

Imported coal prices have doubled to $125 per tonne in the last one year. The company is acquiring two ships with capacity of 40,000 tonnes each for Rs 200 crore.

Coal supplies are critical as the company is planning to almost double its capacity to 18 million tonnes by 2011. Company also plans to raise $150 million through an overseas equity offering.

"India cement is attractively valued and it will remain in the right region as far as next few years are concerned. Its got a good location as far as location is concerned and if it can import coal from its own mines, that would be positive trigger for the stock,” said Sandeep Nanda, Head-Research, Sharekhan.

Cement makers know that they have tough job in their hands. Even as costs are shooting up prices are not going up.

With small quantities of cement trickling in from Pakistan, it will get increasingly difficult for cement companies to hike prices and that is precisely why they will now have to work out deals to make sure that cost pressures are capped to certain extent.

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