Railways hike in Freight Tariff to impact Cement, Steel Cos.

Indian Railways decision to levy 15 per cent busy season charge on all commodities including cement, chemical manure, food grains, iron ore and coal has some dramatic impact in the commodity market and OEM/Infrastructure markets.  Freight tariff for all commodities are set to rise from today onwards.  Indian Railways have decided to levy 15 percent busy season charge on all commodities including cement, chemical manure, food grains, iron ore and coal. This is a regular phenomenon that normally happens during the busy period of October to the pre-monsoon which is June.

Stocks that could get impacted

The three cement stocks that have an exposure to railways are ACC, Heidelberg and Ultratech Cement. ACC and Ultratech were down nearly a percent.

Coal India with regards to this particular freight increase is not impacted at all. The price of coal from the mine to the place of requirement is entirely borne by the consumer.

On this front too it is a double whammy for ACC and Heidelberg Cement because they have high amount of linkage coal.

Moreover, power companies that consume coal from Coal India would get hit on this front.

From the ferrous metal pack side, JSW Steel has been sourcing a lot of their coal from NMDC’s Chhattisgarh’s mines. So they too are going to be impacted. Their margins are going to be under pressure if the freight goes up by nearly 15 percent.

To sum things up a cement price hike of around Rs.10 would offset this particular impact of a higher freight cost.

JSW Steel may increase their prices to offset this particular freight hike.

Facebooktwittergoogle_plusredditpinterestlinkedinmail