February 02, 2007	Friday	Muharram 13, 1428

KARACHI, Feb 1: Cement manufacturers, mainly in the North, raised prices by Rs8 per bag — half of it on Wednesday and the remaining on Thursday, an industry source affirmed on Thursday.

The increase has come quickly on the heels of Rs10-15 per bag raise in the price of concrete at the fag end of last month.

A cement sector analyst said on Thursday that he was in the knowledge that sales of cement for the month of January 2007 had reached a record 2 million tons as construction activity was picking up pace after a harsh winter.

Even for the first six months of FY07, demand had remained strong at 26pc, which was fairly above most analysts’ expectations.

Market sources thought that the industry was lifting prices in a slow and steady manner so as to test how much increase the market could absorb.

An executive of a cement factory in the North zone (Punjab and NWFP), while admitting that the producers had pushed prices higher, brushed aside the re-birth of a ‘cartel’.

He explained that it was not like the previous crisis which the industry had to face in early 1990s because big and mighty overseas players were now active in the industry. “Sanity now prevailed among producers to keep prices high enough to cover the fixed costs,” says the executive.

He said that meetings to form a ‘cartel’ (which he preferred to term as ‘association’) had been held but without an outcome.

An industry watcher thought that the producers were awaiting the expansion capacity of D.G. Khan Cement Company to come on line before allocation of ‘quota’ of capacity utilisation and pricing to which all the producers might concede.

Just before the break up of ‘cartel’ in August 2006, cement prices had peaked to Rs300 per bag, but declined to Rs160 by the last week of December. Producers were now selling a bag at Rs180 to Rs200, with a new tag stamped over the old one as quickly as possible.

A cement dealer in Karachi claimed that prices had also increased in the south zone (Sindh and Balochistan) though not at as much faster pace as in the North.

Atif Malik, cement sector analyst at JS Global Capital Limited, in his January 26 report, mentioned that the upsurge in prices during the last few days was seen mainly due to consensus among marketing heads of various cement companies who decided that prices were very low and they needed to be revised upwards for the industry’s survival.

The analyst stated that conflicts regarding the quota allocation or quantity restriction still remained. But for the moment, producers, though sticking to operate on 100pc dispatch policy, had agreed not to decrease prices as a means to grab market share of other producers. The analyst stated that going forward; cement producers planned to further increase prices and make it a weekly feature once peak demand season started i.e. from middle of February onwards.

Atif Malik added: “Interestingly, due to this price rise, we can also expect demand to jack up artificially as cement dealers might indulge themselves in short time hoarding in order to benefit from the price hikes”.