KARACHI: Cement makers have reduced prices for builders, developers, individual contractors and foreign buyers in the wake of a 25 per cent drop in global coal prices.

But there is nothing for hard-pressed retail customers. And builders have kept the booking rates of flats and houses unchanged despite getting cheaper cement, cashing in on soaring housing demand.

On the back of bulk orders from strong parties, cement makers usually offer them a discount of Rs50-75 per 50kg bag. Sources said big individual buyers like contractors of houses are also getting a discount of Rs30-40 per bag.

However, in the retail markets, cement dealers are charging Rs520-550 per 50kg bag of various companies. Cement rates have been static for months and there are no reports of any price decline by the manufacturers, they added.

The government provided the builders’ lobby with a number of incentives in the 2015-16 budget to boost construction, but the benefit has not been passed on to consumers in the shape of a cut in prices of apartments and houses.

International coal price has fallen by 25pc to $60 per tonne (C&F) from $88 per tonne. Other beneficiaries of reduced coal prices are foreign buyers of Pakistani cement who are being offered cement at reduced rates.

Giving an example, sources said that if a cement maker produces 100 tonnes a day, the share of builders and developers in total sales comes to 40pc followed by 20pc share for exports and 40pc by consumers like contractors, block makers and government projects.

Coal and power constitute 60pc of the total cost of cement production, with their individual share being 25pc and 35pc, respectively.

However, most cement manufacturers get power from the national grid whose rates are still high as compared to a few cement manufacturers who enjoy the luxury of gas-generated power despite shortage of gas. This causes an imbalance in the production costs.

Sources said some cement units, with market share of 30-40pc, are running on cheap gas while others are buying power from the national grid, which is about three times costlier.

The July-September quarter results of cement companies reflect that their profits are either maintained or gone up slightly, while sales revenues are falling due to price reduction being offered to the builders/developers, contractors and foreign importers.

As for exports, the cement industry is facing a tough time after a 2pc devaluation of the Chinese yuan followed by 10-20pc currency depreciation made by South Africa, Sri Lanka and East African countries.

By contrast, the Pakistani rupee lost its value by more than 3.5pc against the US dollar since July 2015.

A further fall in the value of yuan may result in panic devaluation among Afro-Asian countries which heavily trade with China. Under the current currency depreciation scenario by some countries, cement makers have subsidised its product in order to compete with their foreign competitors.

Published in Dawn, October 30th, 2015

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