KARACHI, March 11: The rising number of cement makers switching to coal from fuel oil is expected to enhance the dependence on imported coal to 2-2.5 million tons in the next one and a half to two years, as against one million tons consumption last year.

During the one year, the cement industry utilized one million tons of imported coal worth $35 million despite the availability of local coal at much cheaper rates. These coal were imported from South Africa and Indonesia.

Chief executive, Awan Trading Company, Mohammad Aslam Awan, told Dawn that the way the local cement industry relied on the imported coal — arrival of foreign coal might increase to three million ton in the next three years if more units completely switched over to coal. Around two to three parties, including his company, have been managing coal import business for the last one year.

He said these fewer number of importers were supplying coal to over 10 cement makers from South Africa and Indonesia at the selling price of Rs3,500 and Rs3,150 per ton. However, some companies are also importing coal on their own. On the contrary, local coal is easily available at Rs1,300 to Rs2,500 per ton.

The local production of coal is estimated at three million tons but over 80 per cent is being utilized by bricks makers, while the rest are being consumed by the cement makers to blend it with the imported coal to reduce the production cost, and by the coal-based power stations (one per cent), he said.

He said the imported coal was being used to reduce the production cost by over 50 per cent and it can be gauged from the recent price cut by the cement makers. He said the local coal lacks capability of producing required level of heat and has higher level of sulphur contents as compared to the imported coal.

Cement analysts said that coal had acted as a saviour for some cement makers, which could be seen in the profitability of cement makers in the first half of 2002-2003. Profits of DG Khan and Lucky Cement have increased because of benefit of conversion to coal.

The price decline to Rs180-185 per 50 kg bag from Rs210-225 has resulted in higher volume of sales to 5.5 million tons in July-December 2002-03 as compared to 4.7 million tons in the same period of 2001-02 as many cement dealers had piled up their stocks in anticipation of cartel reformation.

A cement sector analyst at Invest Capital and Securities said that 17 of the 21 listed companies announced their profit and loss account for the first half of 2002-03, and of these 17, eight have incurred losses. Overall gross margins have fallen drastically due to which bottom line has once again returned to red. However, few coal converted plants have seen increased profits.