KARACHI, April 5: For all the euphoria over the prospects of cement exports to Afghanistan, industry sources say that the country has been able to export just under 25,000 tons of cement to that devastated country.
Industry leaders concede that Iran has already captured the bigger slice of the cake. Cost-effective production of the Iranian cement was said to be the reason. “Cement plants in Iran get the furnace oil for as low as $30 per ton and just look at how much it costs us: Rs10,100 i.e. roughly $170 a ton”, says an embittered cement producer whose plant is located quite close to the border with Afghanistan.
Accounting for nearly 35 per cent of the entire cost of production (furnace oil and power together measuring to 70 per cent), price of that essential fuel greatly determines the financial health of cement companies.
High cost of furnace oil has been driving cement manufacturing companies in Pakistan to collectively switch over from furnace oil to coal — the low cost firing system of production — showing a major shift in industry strategy.
An overwhelming number of cement plants have already begun to shed dependence on furnace oil and draw between 30 to 70 per cent of energy from coal. At the speed with which the conversion from furnace oil to coal firing system is taking place at the moment, industry leaders expect majority of the 21 cement producers to have converted to coal by the end of the current calendar year, resulting in annual cost savings of around Rs3 billion to the country.
“Lucky, D.G. Khan, Pioneer, Maple Leaf, Cherat, Bestways are leading the pack and would have converted to coal by December”, says the top man in a cement company. Others would have converted in varying degrees.
The price of furnace oil is currently around Rs9,900 per ton. By contrast, coal costs Rs3,930 per ton. The total annual production of cement in the country is around 10 million tones. Humaira Zaheer, analyst at brokerage IP Securities figures out that the cement plants while using coal — in the blending ratio of around 70:30 between imported and domestic coal — would be able to effect savings of about Rs290 per ton. “Key players like Cherat, Lucky and D.G.Khan can save Rs164 million, Rs238 million and Rs334 million, respectively on annual basis on complete conversion to coal”, says Ms. Zaheer.
Pakistan’s coal reserves are estimated at 184,658 million tons but experts say that, out of those only 4,006 million tons or 2.17 per cent have been classified as ‘measured reserves’. Nearly 97 per cent of the estimated coal reserves are at Lakhra and Thar fields in Sindh and the entire coal from those fields was generally believed to be of ‘lignite’ variety with high moisture, high sulphur and low heating value. These were therefore, not regarded as efficient fuel for a cement plant.
The indigenous coal, had therefore to be blended with imported one, in the ratio of 30:70 — the latter number representing imported variety.
“Lucky Cement imported 20,000 tons of coal in January this year, which was the first coal consignment to arrive in the country”, chief executive of the company, A.R. Thaplawala said to Dawn. He said that a few companies — major being D.G. Khan and Lucky — had also jointly imported, another shipload of 23,000 tons in March.
Excepting a handful of cement companies most companies saw devastating financial results. The first half to December 31, 2001 had turned better but the overall industry outlook for the whole of the current year to end-June — at this time — looks mixed.