- Petcoke share falls to 11% from 66%
- Higher volumes fail to offset rising fuel costs
Shree Cement’s September quarter results highlight a major change in cement sector fuel buying: imported coal has become the dominant fuel, while petcoke consumption has sharply reduced.
The switch has not insulated the company from energy inflation. Landed fuel costs increased y-o-y, putting pressure on profitability despite strong sales growth.
For coal and petcoke suppliers, the results demonstrate that growing cement production does not necessarily translate into higher demand for every fuel. Relative delivered costs, fuel suitability and procurement flexibility increasingly determine buying patterns.
Volumes rise, but profitability weakens sequentially
Shree Cement’s domestic cement and clinker sales increased 18% y-o-y to 9.31 mnt in Q2FY27. Consolidated volumes rose 14% to 10.52 mnt.
The company’s published results release shows consolidated revenue increasing approximately 24% to INR 5,897 crore and EBITDA rising 4% to INR 1,016 crore. Consolidated net profit declined around 15% to INR 263 crore. Against the June quarter, consolidated revenue fell approximately 5%, EBITDA declined 20% and net profit dropped around 50%.
The contrast is significant: sales remained strong against last year, but higher costs and the seasonal volume decline weakened earnings.
Imported coal replaces petcoke
Shree’s Q2 fuel mix comprised 75% imported coal, 11% petcoke, 2% Indian coal and 12% alternative fuels.
Petcoke’s share fell by 55 percentage points from 66% a year earlier. This is a substantial procurement shift, rather than a marginal adjustment.
For imported-coal suppliers, it creates an opportunity to serve a large cement consumer seeking alternatives to expensive petcoke. However, the company has not disclosed the country or grade breakdown of its imported coal purchases.
The mix therefore cannot be interpreted as exclusively US NAPP demand. Cargo quality and delivered economics will determine the suitability of NAPP, ILB and other imported grades.
For petcoke suppliers, the message is equally clear: cement-volume growth alone is an insufficient guide to purchasing requirements.
Fuel substitution does not eliminate cost pressure
Landed fuel cost increased to INR 2.09/kcal from INR 1.95/kcal in Q1 and INR 1.66/kcal a year earlier.
Management expects a further increase to approximately INR 2.15-2.20/kcal in Q3, implying another 3-5% sequential rise. The switch towards coal therefore appears to be managing relative fuel economics without removing exposure to the wider increase in energy costs.
Suppliers must compete on usable energy and kiln performance, not simply price per tonne. Calorific value, ash, sulphur, moisture, handling and grinding requirements influence the eventual cost of clinker production.
Clinker production provides stronger fuel demand signal
Management said clinker production increased 33% y-o-y as the company prepared for stronger demand in subsequent quarters.
This is particularly relevant for energy watchers because clinker production drives kiln-fuel consumption more directly than cement sales.
The supplied notes also show blended cement’s share declining to 58% from 68% a year earlier. Changes in product mix can alter clinker requirements, although the available figures do not support a precise calculation of incremental fuel consumption.
Together, higher clinker production and the shift towards imported coal suggest meaningful coal requirements. Inventory movements and future utilisation will determine subsequent procurement.
Better pricing could support Q3 recovery
Cement realisation stood at INR 4,870/t, marginally above last year but approximately 1% below the June quarter.
Management indicated that October prices were better than September and expects stronger realisations in Q3. Premium products accounted for approximately 29% of trade volumes, with a target of 40% by FY28-29.
The company reiterated FY27 volume guidance of 40-41 mnt.
For earnings, the key question is whether stronger prices and operating volumes can offset the next increase in fuel costs. An improvement in demand will help, but the benefit depends on price retention and cost absorption.
Logistics savings help, but remain under review
Average lead distance declined to 427 km from 445 km in Q1 and 441 km a year earlier – reductions of approximately 4% and 3%, respectively.
Management attributed logistics savings to shorter distances, seasonal railway discounts and data-driven optimisation, while cautioning that their sustainability needs further assessment.
Rail’s share declined to 8.5% from 9% sequentially and 11% a year earlier. This freight mix measure should not be treated as the transport split for inbound coal.
The company is also testing electric equipment and vehicles in mining and transport. These remain trials, with commercial benefits yet to be established.
Green electricity addresses separate energy requirement
Shree plans to add approximately 80 MW of green power capacity to its existing 667 MW. Green electricity supplied 65.2% of consumption during Q2, including wholly owned Indian subsidiaries.
This reduces exposure to conventional electricity costs, but does not directly replace kiln fuel.
Alternative-fuel expansion addresses the thermal side. The notes separately report a thermal substitution rate of approximately 5%; this should not be equated automatically with the 12% alternative fuel mix figure because their measurement bases are not established.
Expansion supports longer-term requirements
The Meghalaya integrated plant remains targeted for Q4FY28. In the UAE, a new 3 mnt/year cement mill commissioned in September increased capacity to 7 mnt/year.
The distinction matters: integrated clinker capacity adds thermal-fuel demand, while grinding capacity primarily adds electricity consumption and clinker-handling requirements.
BigMint assessment
Shree Cement’s results reinforce the changing relationship between cement growth and fuel demand.
Imported coal has gained substantially at petcoke’s expense, yet energy inflation continues to squeeze margins. Higher clinker output supports consumption, while better pricing, logistics efficiency and green electricity offer potential offsets. For suppliers, the opportunity lies in delivering suitable fuel at a competitive energy cost. The company’s sharp mix change shows that procurement remains flexible – and market share between fuels can shift quickly.
Leave a Reply