KARACHI, Nov 28: Cement prices increased by Rs8-12 per bag on Tuesday, which comes quickly on top of an increase of Rs5-10 two weeks ago. The cost of a 50kg bag of cement has risen to an average of Rs220-225 in the North and Rs230 to Rs 240 in the South.

Dealers say the sizeable rise in price from Rs175 a bag three months ago is a result of rebirth of the “cartel.”

In his sector report of Nov 26, analyst Bilal Hameed at JS Global stated that the main reason for the recent rise in cement price was massive increase in input costs as coal prices had surged to $130-140 per ton.

That had negatively impacted cost of sales of cement companies as fuel costs comprised 60-65pc of total costs.

The analyst states: “In order to undo this negative effect on profitability, cement companies have developed an informal understanding amongst themselves to gradually increase prices to maintain and improve their margins.”

Several sector watchers at other brokerage houses corroborated that statement.

Export of concrete is fast getting to be the mainstay for cement producers due to a burgeoning regional demand and rising export prices.

Afghanistan, Middle East and India are major destinations for the country’s concrete.

A senior official at one of the cement companies that also rolls out bags from plant in the South said 75-80 per cent of their output from that plant is despatched overseas at average price of US$65 fob per ton.

The pride among cement producers is legendary. And that has often resulted in price war among themselves even at the cost of huge losses.

But analysts say that the hit on the bottom line in the 1QFY08 has pushed producers to put their heads together and arrive at “understanding” on prices and production.

Cement manufacturers who never accepted the existence of a “cartel” have a greater reason to deny it this time: The newly created ‘Competition Commission’, built on the ashes of ‘Monopoly Control Authority’ is looking down over the industry practices.

And to compound the problems Khalid Mirza, has been placed at the head of the Commission.

Mirza, the former chairman of Securities and Exchange Commission of Pakistan (SECP), is the man whom stock brokers love to hate for the dogged determination with which he pushed through several capital market reforms during his tenure.