LAHORE – The cement exports, which provided some relief to the industry in past few years, have declined rapidly during the first eight months (July 2011 to Feb 2012) of current fiscal year.

During this period, the decline in exports was 5.57 per cent, declining to 5.62 million tons from 5.95 million tons during the corresponding period of last year. However the exports to India, mostly through train, have showed increase.

A spokesperson of the All Pakistan Cement Manufacturers Association (APCMA) has regretted that the growth during past four years was much below the expectations, as the government failed to provide funds for vitally essential infrastructure.

He said that energy, which constitutes more than 50 per cent cost of production of cement, has taken a quantum jump in last few years, almost doubling the production cost.

The ever-increasing prices of diesel, coal and electricity are the major factors contributing to the rampant hike in the cost of production, he said.

Over the last 10 years the coal prices increased at an average of 14.27 percent, electricity tariff surged by 9.5 percent, diesel cost shot up by 19.59 percent, furnace oil rate jumped by 18.32 percent, packing material rate elevated by 6.82 percent and mining taxes were lifted by 10.06 percent, thus multiplying the cost of production. The rampant increase in the cost of production cost will completely destroy the cement industry, he feared.

The spokesperson said that the surge in energy costs has forced the sector to opt for cheaper energy sources resulting in further capital costs. The sector requires continuous capitalization to install larger and more efficient plants, equip existing plants with capabilities to use alternate energy and also keep changing equipment with more energy-efficient one. For instance it costs Rs1 billion to convert furnace oil cement plant to coal, he stated.

“We always look for ways of lowering the energy cost by identifying alternate energy sources and also by updating equipment with more efficient machinery. We have to bear research cost, capital cost and the cost to pursue more efficient plants, but this is not usually included in manufacturing cost of cement,” he claimed.

According to him, it takes four years to install an average cement plant during which time, the economic and market conditions change, growth rate, government spending and personal incomes all change. By the time the plant goes into production the cost of project has gone up by at least 50 percent due to rampant inflation and rupee devaluation.

As the US dollar appreciates against Pak currency and above all, the embattled government shelves the idea of constructing new dams the cement sector turns sick. The era of cement over supply begins, the cement prices fall and the industry starts occurring huge losses. This is the time when cement sells below par and consumers really benefit from ever-low cement prices.He added that just the freight cost for transportation of coal alone for a plant located in the north of Pakistan is Rs150 million per month.

Additionally 230 odd trucks are required daily for transport of cement.