Gujarat Alkalies and Chemicals stock has been up in trade of late. It has gained 45 percent in just three months as buzz of caustic soda prices rising gains momentum. In an interview to CNBC-TV18, PK Gera, MD of Gujarat Alkalies spoke at length about price rise of caustic soda.
Gujarat Alkalies and Chemicals stock has been up in the trade of late. It has gained 45 percent in just three months as the buzz of caustic soda prices rising gains momentum. In an interview to CNBC-TV18, PK Gera, MD of Gujarat Alkalies spoke at length about price rise of caustic soda.
Gera said that reduction in production by China and Europe has impacted caustic prices.
He further said that price has risen to Rs 45,000 per tonne from Rs 32,000 per tonne in May.
We expect caustic soda prices to stabilise around Rs 35,000-38,000 per tonne, he added.
Below is the verbatim transcript of the interview.
Sonia: If you can just tell us about the caustic soda prices, what the trend is looking like over the next say 3-6 months and how would that impact the company like yours?
A: Caustic soda prices are historically high and the reasons as I see is in China and Europe. Because in China the production that we used to see and dumping we used to have and of course that has reduced quite and Minamata Convention has compelled the Europeans to shift their plants from the traditional technology to membrane technology which our company and entire chloralkali industry in India had adopted long back. So the result is that there is a very good market and we are taking advantage of that. So, perhaps investors are also looking at it and rewarding it. Of course our performance has been good for other reasons as well because we are controlling our cost significantly. Energy is the major cost and we have installed more than 200 megawatt of wind energy where we could reduce the cost as well.
Latha: What was the price increase in the second half or maybe I should say third quarter compared to the first half and therefore how much might margins benefit in the second half for you more than then first half?
A: Third half has been a very good price regime for us. It has been increasing.
Latha: If you could give some numbers?
A: What was being sold at Rs 32,000 a tonne let us say in May is now exceeding Rs 45,000 a tonne, it varies and you cannot say an absolute price. It is not MRP here.
Latha: So some 30 percent rise in prices?
A: Yes, about 32-45 or you can say 50 percent. But these are maximum, I am talking about maximum, deals are going on at Rs 43, 42 also, Rs 38 as well. But it all depends. If somebody is taking for a huge quantity on a long term we give for a different deal.
Anuj: How many of these deals are long term in nature because is there a risk that while FY18 in this case looks good but then FY19 because the base effect than goes up it becomes bad again, is this bit of a yearly play or can you have a three-four years sort of consistent uptake?
A: I really don’t think it will last longer than maybe in June. This June is max, by that time China is going to put its act together. Europe is going to come back with their membrane technology sales on screen. Even America had a problem few months back, so this is a very temporary phenomena. I don’t foresee, right now we are also facing a problem of water for example in Dahej the Narmada River because of the dam or the Narmada dam the water in the Narmada river is not that much and as a result the chloride content are going high.
Anuj: That mean you can’t extrapolate this quarter and next couple of quarters in terms of a trend?
A: Yes, I agree, it is not possible and it should not be done and caution is my word for all my future and we are trying.
Sonia: Even when the Chinese production does come back what kind of a base do you think caustic prices could hold? I mean are we looking at Rs 35,000, 38,000 or do you think it could fall further than that?
A: No, it will stabilise around Rs 35,000-38,000 types that is my expectation after June.
Latha: If you can give us a general idea as to how much revenues can rise for the second half and what is a vague estimate for FY19, only on revenues?
A: I thought you mean the current quarter that is the fourth quarter?
Latha: Yes, the third quarter plus the fourth quarter since you would know, I mean you have been through half of January?A: We are already mid of the January and what we are seeing here at least 12 percent rise over same quarter of the previous year. So, Q4 of the previous year we can expect at least 12 percent rise there.