Cement Packing Costs To Rise

Cement Price Rise Expected

Cement companies are fighting rising input cost increases on multiple fronts. Prices of petroleum coke, a key raw material, remains very high. Since most of its requirement is met through imports, a weakening rupee is adding to the cost burden.

Global oil prices are inching up, translating into increased diesel prices and elevated transportation costs for the cement industry. A spike in crude oil prices has also a bearing on the sector’s packaging cost as most cement companies pack their cement in HDPE bags. Cement is packed in bags which are either made of high-density polyethylene or laminated woven paper. As per some analysts, many cement companies opt for the latter and although these bags are sourced locally, crude oil price movements do impact prices of HDPE bags.

So far this year, crude oil prices have jumped about 24% and are currently at about $82 per barrel. Historically, it has been observed that packing material cost per tonne has a fairly high correlation with crude oil prices given the link between crude oil and HDPE.

The packing costs of almost all major cement companies in India have shown increases according to public reports. Considering the surge in crude oil prices this year, the packing component of cement companies overall operating cost is set to rise. Cement insider reports expect packing costs to increase by about ₹30 per tonne.

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