LAHORE - The industries that rely on coal as a source of fuel for production, such as energy and cement, are predicted to suffer from a fall in profits, as international price of coal, after a period of steady prices, is increasing now.

The Richard Bay Coal Terminal (RBCT) in South Africa is the single largest export coal terminal in the world. Pakistan imports from the terminal due to its close proximity to the country compared to other large terminals. Coal prices from Richard Bay have risen from $71.34/t in September to $80.48/t in Nov.  The price of coal for Dec was also predicted to be around $90/t. Industry insiders have said that cement companies could take a hit of between 3 – 7% on their earnings.

The high cost of coal imports in Pakistan is also due to the depreciation of the rupee against the dollar. Experts said that the recent increase in international coal spot prices (FOB Richards Bay up 13% since mid-Sep’13) has raised investor concerns, as coal constitutes a significant portion of cement production cost and holds considerable implications for the sector’s outlook. The strength in coal prices comes on the back of increased demand from China (mainly seasonal) and production cuts by miners.

In this regard, some quarters have forecasted coal prices to clock in around an average of $82-85/ton for 4QCY13.

The fortunes of the cement and energy industries are predicted to change with the fluctuations in the prices of coal. Cement manufacturers in Pakistan are exploring the possibilities of using indigenous coal.

The country is said to have huge coal resources, but this has not yet been mined for various reasons.