KARACHI, Sept 12: Lucky Cement has started exporting 3,000 tons per day of cement to India at an attractive price of $70 per ton (fob), making the company first to make a successful entry into the Indian market.

A senior company official said that the shipment had begun early this month and contract for 125,000 tons had been signed with the Indian importers.

He said that payment for sale of 30,000 tons had been received. That was until early last week. Director Abid Ganatra could not be reached on Wednesday for latest update.

Following the issuance of BIS certificate, Pakistani cement producers have a clear way ahead to tap the potential of the Indian market.

Due to substantial price premium in India, compared to export price of $48 to $50 per ton (fob) in GCC countries, local cement producers have been eyeing the Indian market since March this year when Lucky’s consignment of 5,000 tons was first despatched. That was withheld for want of BIS certification, but subsequently cleared.

BIS certificates have been issued to several Pakistani companies, which are preparing to dispatch the commodity. Shortage of trucks is a major road block in exports to India via the Wagah border. But cement sector analyst Khurram Schehzad at InvestCap believes the problem will be resolved by the beginning of next month.

“Lucky has nonetheless snatched the first mover advantage”, he said since the company exports product from its Southern region plant via the Karachi sea port. Other companies such as Maple Leaf are following suit.

But in the business of cement neither country is doing the other any favours. India has been keen to import due to the price differential benefit with the Indian cement costing $109 per ton in the Indian markets compared to Pakistani cement cost of $90 per ton (all expenses included).

And for Pakistani producers, the retention price for exports amounts to Rs200 per bag compared to Rs170 in the local markets.

Pakistani cement producers have been looking for greener pastures abroad. Afghanistan, Dubai, South Africa and Iraq are major destinations. And with no production capacity utilisation quota system among producers (generally referred to as cartel formation) in vogue, every producer finds himself free to despatch as much as possible to markets that he may find most lucrative.

The opportunities look endless, at least for the time being. “Qatar is fast running out of its limestone deposits, which constitutes 80 per cent of raw material used in production of clinker,” says Mr Badruddin Fakhri, Managing Director Galadari Cement (Gulf Limited). That could give further push to clinker exports to Qatar in the near future.

All Pakistan Cement Manufacturers Association (APCMA) figures released last week revealed 144 per cent increase in exports during August 2007 at 575,987 tons compared to 236,098 tons in the same month in 2006. For the first two months of the current year, cement exports rose by 139 per cent to 1,015,084 tons against 424,260 tons during same period of last fiscal.

So would unbridled exports hurt the local market? Cement producing exporters naturally do not think so. They argue that the annual local demand is 21 million tons, while production capacity has increased to 32 million tons, representing surplus of around 11 to 12 million tons.

Local users of the commodity vehemently disagree. According to market sources, the price of 50-kg cement bag in the country ranges between Rs215 in the North to Rs260 per bag in Karachi, which would give an average price of Rs235 per bag.

A major local producer was asked about the status of investigations by the Monopoly Control Authority (MCA) relating to issues, including pricing in the local market and possibility of presence of a ‘cartel’. He responded that the MCA had not levelled any allegations of wrong doing, but conducted an enquiry.

“Its findings were based on just one month’s benchmark — prices in February 2007,” he said and contended that those could not be construed to be representative of the market realities.