LAHORE - The All Pakistan Cement Manufacturers Association (APCMA) has expressed its concern over sharp rise in coal prices, impacting the cost of production of cement.
Coal price which was $54 in May 2016 has now increased to $105. According to industry experts, higher coal prices have dampened local cement players’ profits, as coal constitutes more than 30 percent to the total production costs. Experts said that coal prices have been gradually increasing since May 2016, when China (world’s largest coal producer, importer and consumer) imposed supply side measures to limit its coal mining capacity. Recent surge to the trajectory came from stricter local rules on coal transportation which fueled coal imports.
In shorter term, domestic Chinese coal supplies may increase in order to prevent a supply shortfall, which would be a short-term bear point for all coal prices. However, upcoming massive coal demand from South Asian countries owing to upcoming coal power plants, is likely to keep the coal prices downward sticky in longer term and it is expected the prices to remain up.
Thus, the investment case of the country’s cement sector is now premised on volumetric growth backed by rising property prices, increased public and private sector infrastructure spending and China Pakistan Economic Corridor (CPEC) related projects.
Manufacturers have appealed the government to take steps to boost the housing sector, as currently the cement industry is mostly depending on infrastructure projects. They said that sustained growth in housing construction is essential to absorb the additional capacities that would be operational in two years. They urged that the government should avoid disruptive policies that impact construction growth in the country.
According to the data released by APCMA, during the first four months of current fiscal year, the cement industry has posted a growth of 11.26 percent in local despatches compared with local despatches during same period of last fiscal year. Exports also recorded a growth of 1.73 percent compared with exports during the same period of last year. The overall situation during first four months of current fiscal year showed a 9.57 percent growth compared to the same period of last fiscal year.
Domestic despatches in October 2016 were 3.008 million tons registering a growth of 15.88 percent, while the exports amounted to 0.518 million tons reflecting negative growth of 1.96 percent, compared to October 2015. Total cement despatches in October amounted to 3.527 million tons depicting a growth of 12.87 percent. Capacity utilisation for the month of October 2016 was 92.77 percent.