LAHORE – Cement prices have increased by Rs5 per 50 kg bag to Rs440-445 in different localities of the country. Cement manufacturers claimed that hike in cement prices is due to recent climb in coal prices, which have registered a jump of around 10 per cent over the last three weeks.

Cement industry experts said that during FY12, cement prices have followed an upward trajectory and posted an increase of 9 per cent.

Moreover, the Lahore High Court ordered the construction of much delayed and debated Kalabagh Dam (KBD), in light of the decision of the Council of Common Interests (CCI). Experts remain skeptical on the project, considering the associated political grievances, but if construction kicks off, the project would require 8-10 million tons of cement over a period of 6-7 years. With their close proximity to the proposed construction site, they believe that MLCF, PIOC, DGKC and BWCL would emerge as the major beneficiaries if the KDB gets the green light.

The profits of cement companies have increased seven times in FY12 to Rs16 billion or $168 million due to robust increase in cement prices that witnessed a growth of 26 per cent. Interestingly, out of 10 companies which have announced their full year results, only one has posted losses in FY12 whereas last time almost 50 per cent of the cement companies were in losses. Thus, better cement sector outlook and turnaround in FY12 led cement sector posting 119 per cent return during 2012YTD as well.

The analysts said one of the turnaround stories for cement manufacturers in FY12 was sharp rise in local cement demand which led to improvement in cement prices at local arena. This led to handsome increase in total revenues by 33 percent to Rs123b ($1.3b).

However, manufacturers are of the view that on average, cement price increase by 6.28 per cent compared with steel rates raised by 15.90 per cent while bricks cost up by 13.14 per cent since the year 2000 till FY12. Similarly, the cost of other commodities including urea and sugar also grew by 14.95 and 12.29 per cent respectively in the same period. They said that the input cost over the years has raised tremendously as diesel prices increased by 94.3 per cent in 2011-12, 81.4 per cent in 2010-11, 69.3 percent in 2009-10, 60.6 per cent in 2008-9, 40.8 per cent in 2007-8. Power rates went up by 8.74 per cent in 2011-12, compared to 5.18 per cent in 2007-8 while coal jumped up by 111.2 per cent in 2011-12.