KARACHI: Cement manufacturers in the northern region (comprising Khyber Pakhtunkhwa and Punjab) have slashed prices of the commodity by Rs10-25 per 50kg bag.

Lucky Cement slashed the price by Rs25 per bag on Aug 17. However, cement players in the southern region have kept the prices intact so far, said a manufacturer.

Analysts at various brokerage houses offered differing views regarding the situation.

BIPL Research’s Ayesha Fayyaz said that as per the latest data of Pakistan Bureau of Statistics (PBS), cement prices in KP and Punjab declined by Rs22 per bag and Rs15 per bag, respectively.

The decline in prices has taken the investors by surprise since cement prices in North were anticipated to remain stable after the pass on of the federal excise duty (FED) where prices increased by Rs26 per bag (average) on Jun 8, 2017, she said.

Cut in the maximum retail price (MRP) of Rs25 per bag by Lucky Cement is to adjust the sales tax amount determined on the basis of MRP, she added.

She attributed the cut in prices in North to slower construction activity resulting in weaker demand growth due to seasonal factors (Eids inclusive).

Syeda Humaira Akhtar at BMA Capital said cement prices in the northern region have come down byRs10-25 per bag to an average of Rs525 per bag.

Nabeel Khurshid at Top Line Securities said others players in North are also offering discounts of Rs15 per bag. Cement players in June 2017 raised prices by up to Rs40 per bag which included the FED impact of Rs15-20 per bag (the government had raised the excise duty on cement in the budget 2017-18).

North, which has 80 per cent of total local demand, has benefited the most from construction activities. Due to a robust demand in the region, there has been some flexibility lately in the marketing arrangement among players as opposed to a firm control on supply and pricing witnessed before. Resultantly, players are selling cement at discounts in order to grab more market share.

This was seen in Feb-May 2017 when Cherat Cement’s capacity came online and cement players started offering up to Rs40 per bag discount in North, though this was later reverted.

Mr Khurshid said a capacity addition of 5.25 million tonnes in South (61 per cent of existing cement capacity of the region) by June 2018 might also put some pressure on cement prices.

However, proximity to the Karachi Port might lure manufacturers to further tap into the export markets and should provide some relief to the producers in South.

Published in Dawn, August 22nd, 2017