KARACHI - International coal prices reached to an unprecedented level during FY08 after registering an increase of 139 per cent on Year on Year basis. This increase is likely cause a decline in the earnings of local cement manufactures by 30 per cent. In tandem with international oil prices, the coal price trend has also been continuously on the rise as prices hit the $186/ton CIF mark (US$163/ton FoB) during January 08. Almost all of the local cement manufacturers above 90 per cent have converted their plants to coal, which have made them vulnerable towards the recent price hikes in this commodity. The manufacturers have already posted significant decline of 65% in profitability recorded during 9MFY08, mainly because of the recent unprecedented rise in coal prices. Coal costs around Rs64/bag, however, the retail price pass-on Rs5 to 6 increases of about Rs10-15/bag could not make up for the recent price hikes so far, which may result in further deterioration in gross margins of the manufacturers, going forward. Moreover, the expected gas price increase may also hit some of the cement manufacturers' earnings further, analysts said. The coal price climb so far can be divided into three major phases during FY08, coal prices rose by 26 per cent during first quarter of FY08 from July to September 07 from $80/ton to $101/ton CIF, another round of price hike by exactly 26 per cent from September07 to January 08 was observed coal prices touched $128/ton CIF and the last rally in prices recently documented, went as high as 46 per cent since Feburary08 to date. The price levels may continue to persist as long as international oil prices do not show any sign of slowing down. The manufacturers are expected to pass-on prices on the back of consistent rise in coal prices. However, already- squeezing local demand along with rising prices may hurt volumes. , and therefore, lower ability to pass-on more hikes in costs. The result would be an erosion of earnings by 30 per cent, analysts said.