LAHORE The regional competition has started to hinder the local cement export, as the production came down to 32.3 million tons in 2010 versus 33.4 million tons of 2009, down by 3 per cent. However, on monthly basis, the sale registered a rise of 3 per cent to 2.5 million tons in December. Experts said that exports via sea registered a decline of 37 percent during first half of the fiscal year 2011, which indicated early impacts of rising regional competition hindering the export volumes. They said that with rising supply capacity in Saudi Arabia and an overhang situation in the UAE, decline in export to Middle East and North Africa regions was also on the cards. According to the latest figures, though a growth of 5 percent was witnessed in 1H2010, floods in Jul-Aug resulted in demand contraction of 11 percent in 2H2010. Local sales were recorded at 22.7 million tons in 2010 against 22.1 million tons in 2009, up by 2 percent. However, on the export front, sales declined by 14 percent to 9.7 million tons due to a slowdown in global demand and commissioning of new capacities in the region. Experts said that while exports to Afghanistan have registered an increase of 23 percent to 2.3mtpa, exports via sea appear to be a bone of contention for the companies. Exports via sea registered a decline of 37 percent during 1HFY11, which indicates early impacts of rising regional competition hindering export volumes. While export market continues to cause concerns, Omar Rafiq, an analyst, expect local demand to pick up. With the Rabi season coming to an end, farmer and private sector liquidity is likely to fuel private sector construction. He said that as yet rising coal prices are also causing a concern for sector profitability; coal prices have risen to nearly USD130/ton (landed cost) post the floods in Australia. If high prices for coal persist, and local prices remain stagnated. With 4Q2010 sales down 4 percent YoY, it is expected improvement in local demand from Feb 2011 onwards, on the back of reconstruction activities in flood hit areas. Encouragingly, local offtake in Dec witnessed an improvement of 3 percent to 1.8 million tons, but not enough to improve on annual basis. Governments tough fiscal position has resulted in a massive cut in public spending; therefore, cement sales reported a 5 percent YoY decline. Exports too rose by 3 percent in Dec to 708k tons. However, with international prices lower than the break-even levels for most manufacturers; export sales witnessed a decline of 11 percent during the month. Overall dispatches stood at 2.5 million tons, up 3 percent but down 7 percent. Atif Zafar, a cement industry analyst, said that after registering a decent growth of 5 percent in 1H2010, industry sales witnessed a decline of 11 percent in 2H2010 amid floods, resulting in a 3 percent decline for 2010. Local sales witnessed an increase of 2 percent in 2010 whereas export sales were recorded at 14 percent lower than last year. Furqan Punjani believes cement dispatches will improve marginally in 2HFY12 with major contribution from local demand once reconstruction activities begin in flood affected areas. With these numbers, cement dispatches in 1HFY11 fell by 9 percent to 15 million tons compared to 16.6 million tons. During the period, exports eroded by 17 percent to 4.65 million tons versus 5.58 million tons while local dispatches fell by 5 percent to 10.4 million tons compared to 11 million tons in same period last year. He said the decline in exports was due to declining sales to Middle East and complete halt in exports to India amid expiry of BIS certificate (Bureau of Indian Standards) quality assurance certificate from Indian authorities. Similarly, lower increase in local demand was due to devastating floods and slowdown in economy growth. Salman Abduhoo