Total confusion is prevalent in the market on whether the locally-manufactured cement has really found its way into the war-torn Afghanistan, or it is a sheer speculative move of the manufacturers and the market players to trigger a rally in their scrips at the bourses.

Cement manufacturers are reluctant to offer any comment on this but analysts at various brokerage houses hold different views, predicting a slowdown in the export of cement to Kabul, while others see no concrete rationale behind the export story at the moment.

The Taurus Securities, a week back, had informed of a slow-down in cement exports to Afghanistan due to the delay in the commencement of the much-expected reconstruction work but had thought a pick-up in the demand of this commodity may soon after the international agencies start their construction activities.

The brokerage houses believe, the procurement process by international agencies will start in the later part of the fiscal 2001-2002, while the real effect of it will be visible by 2002-2003. Previously, each manufacturer was exporting 150-300 tons per day, whereas, at present, the entire industry is exporting mere 250-300 tons daily.

Although, the same brokerage house had come up with a different version on the cement update some few days back, wherein it had stated the exports to Kandhar and southern region would decline, but would gradually rise to Kabul, Jalalabad and some north-eastern region.

The current demand of Pakistani cement has ensued from some local Afghans for minor reconstruction purpose as the cold weather is still restricting major construction activities to take place.

The industry believes of a spurt in demand next month i.e, in April when the exports are anticipated to touch 20,000 tons, while the real demand is expected from June onwards.

On the other hand, one research analyst at the Invest Capital and Securities has a different view as according to him, the cement sector, which was expected to be one of the greatest beneficiaries of the Afghan war, appears to have been hit by continuing recession which has enveloped the entire manufacturing sector.

“The production of cement was expected by many speculators to pick up after a sluggish first half of 2001-2002 — when it had declined by 2.3 per cent over last year — but the July-January 2001-2002 figures reveal the production to be ranging at 5.59 million tons as against 5.914 million tons i.e, down by 5.5 per cent”.

“The rally in cement stocks during January and February this year, based on the export potential to Afghanistan, was purely speculative and fundamentally the sector still remains in trouble”. The scrips of this commodity had witnessed an unprecedented boom as the market capitalization in this sector rose by 67 per cent during January but saw a downward correction of 12 per cent in February. The markets are banking on the reconstruction work in Afghanistan as the activity is yet to pick up to the desired level.

Currently no official word, either from the Afghan interim government or from the Pakistani government, has been received on the actual demand and the requirement of this commodity. However, according to estimates, about 20 per cent of all the financial aid to be received by Afghanistan will be spent on cement for the reconstruction purposes. An average of around two to three million tons of cement consumption per annum is being expected during the next five years.

Can Pakistan afford to export cement to Afghanistan under the prevailing prices? Invest Cap’s another analyst believe that Afghans who were currently importing cement from Pakistani exporters in the range of $27-32 per ton, while prices being offered by Iran are lower because of their economies of scale and better cost efficiencies, and just because Iran has an idle capacity to the tune of four to five million tons (30 million tons capacity) annually, therefore its contribution cannot be underestimated.

The cost of manufacturing cement in Pakistan comes to around $30 a ton which is almost the same as the export price.

Pakistani cement makers who have chosen to venture into the export business will gain in terms of economy of scale as cement prices being in Afghanistan fall in the same range of $27 to $30 per ton.

The State Bank’s half yearly report (July-December 2001) indicates the realization of the proposed reconstruction in Afghanistan to bring some relief to the cement sector, especially in the second half of 2001-2002.

It states the Pakistani cement which is being sold on premium due to its quality has provided local manufacturers have an excellent opportunity to utilize the excess capacity which has been causing ailment to the industry for the last five to six years.

The central bank’s report suggests that the cement makers would cut their cost by switching over their production to coal. Majority of the industry is using furnace oil as fuel which alone constitutes 35 per cent of the total cost of production.

There are 17 cement manufacturers, selling 10 million tons in the country against the capacity of over 16 million tons.