July 03, 2006	Monday	Jumadi-ul-Sani 6, 1427

THE cement sector has been in the news because of price hike, imbalance between demand and supply and threat to manufacturing capacity expansion as posed imports.

In April, when ex-factory cement prices ranged between Rs340—Rs360 per bag and the retail prices went as high as Rs400 a bag, the authorities decided to import cement from China, India and other countries. The decision brought the cement prices down to Rs295 per bag.

The various reasons cited for the price hike included the soaring input costs, technical faults in one or two plants for a short period of time, high demand because of reconstruction activities in the quake-hit areas and building of new dams. Other factors being the predicted high export because of a construction boom in the UAE and the ever-increasing demand in Afghanistan etc.

All these reasons apart, one can see that the cement prices plummeted because of the decision to import it. Since the demand was high, prices went up. When that demand was partially met by imports, the prices came down.

The ex-factory prices at present range between Rs280—285 and the retail prices between Rs290—295 per bag. However, the concerned authorities want the retail prices to range between Rs280—285 per bag to benefit the consumers.

The prices would, perhaps, be stabilised because of the expanding capacity of manufacturers, its import particularly from China and the threat of the Iranian cement which could generate a competition in the coming years.

Lucky Cement, DG Khan Cement, Fauji Cement, Pakistan Cement, Pioneer Cement etc are going through their expansion phase. The production in 01-2002 was 9.9 million tons per annum which increased to 11 million tons in 02-03. In early 04, the per annum production touched 17 million tons. At present, per annum production is around 22 million tons.

However, the bad news for local manufacturers was the arrival of the Chinese shipment of 26,000 tons in the third week of May which is available for around Rs255 per 50 kg bag (the subsidized price) against the Rs295 per 50 kg bag of the local cement. While some people have expressed concerns over the quality of the Chinese cement which is packed here by the importer, others believe that there is no difference between the local and the imported Chinese cement.

China produces three types of cement. While she uses the high grade cement for its own projects, the lower grade is exported. India has banned the export of its cement which would have been more economical in terms of freight.

The recent development in the market is the issue of the Iranian cement. Will it prove to be a threat for our cement manufacturers? Between March-03 to March—04, Iran produced 30 million tons and imported around 1.5 million tons to meet the demand. There are estimates that the cement production capacity will increase up to 75 million tons by early 2008 and the domestic demand would be around 40 million tons. Iran would have potential to export around 35 million tons in 2008.

The question is: who would be the buyer of the product? Off course, Afghanistan and Iraq, because of the US influence, would not buy the Iranian product so the potential market for the Iranian cement would probably be Pakistan. Pakistani commodity would be exported, in case allowed, to Iraq, Afghanistan, and UAE and there are chances that the Iranian cement would penetrate the Pakistani market.

Well, 2008 would be very crucial year as Venezuela would invest $220 million to build a cement plant with the help of Iran in the next three years for which Venezuela has paid $48.5 million to an Iranian cement company as an initial payment to begin the project. A German company will build two cement plants in Isfahan and Delijan. A new cement production line set up in Karoon Cement Company will produce 3500 tonnes per day and is expected to be operational by early 2008.

According to some estimates, Pakistan has a potential to export around 10 million tons at present. Our local production potential is estimated at over 40 million tons per annum over the new few years, there will be need to attract markets like UAE, Afghanistan, Iraq etc. It should be the responsibility of the authorities to provide bulk-handling facility to exporters.

It is also believed that by 2009 the cement manufacturers will operate at around 65 per cent capacity. The remaining 30—35 per cent capacity can be used for export. The future outlook of the cement sector looks promising.