 "Analysts not worried over rail freight hike for coal")
The announcement of railway's hiking freight rate for coal may have raised some eyebrows initially, but market experts see it having a minor impact and view the move as a freight rationalisation measure.
The railways have raised coal freight rate by 8-14 per cent for distances between 200-700 kms. However, for distances beyond 700 kms there is a reduction in freight by 4-13 per cent. Also, there is no hike in freights up to 100 kms.
Since coal is the main energy source for cement, metals and power producers, any railways' announcement on coal freight hike is looked at with concern. Nevertheless, looking at the cost increase on per tonne basis for coal, the latest increase is not too steep whereas in some cases it may also be a pass-through, say analysts.
For power, Energy analysts as Sachin Mehta at Centrum Broking are not much concerned. Mehta says the cost increments will be a pass-through for power sector.
For cement, the increase in freight for the manufacturers who source coal from distances between 200-700 kms may see some rise in costs. Analysts say that this will be to the tune of Rs 10-13 or maximum Rs 15 a tonne on account of new freight table of railways. Added to this, is planned levy of a coal terminal charge (CTS) both at loading as well as unloading terminals for traffic of coal. Thus, with CTS, analysts say that overall costs on coal freight can increase by as much as Rs 30 a tonne. However, cement players use a mix of petcoke and coal to meet their fuel and power requirements and hence the actual cost increase will be lower than Rs 30 a tonne. At these levels too, it works out to be a maximum of Rs 1.50 per 50 kg cement bag in costs, which can be easily passed through. Also, looking at the healthy pricing and demand scenario anticipated by analyst for cement, experts are not concerned.
For metals, looking at the high energy requirements by both ferrous and non-ferrous players, analysts as Goutam Chakraborty at Emkay Global say that it may be marginally negative. Nevertheless, the impact on individual manufacturers may be different and cannot be quantified now, adds Chakraborty. Also, the fact remains that many producers have their captive mines and many production facilities are also in 200 kms range, which means not much rise in costs. Thus, overall impact may not be too steep. The major metal players as Tata Steel, JSW Steel, Hindalco, etc closed about half a per cent lower on the bourses on Tuesday and it was only Vedanta that saw 1.3 per cent correction.