KARACHI, May 30: The cement companies are attempting to use tire derived fuel (TDF) as an alternative to coal in manufacturing as a means to improve margins.A report by analyst Yawar Uz Zaman at Investcapital stated that energy costs formed as much as 60 per cent of the totals of cost of cement production. Most of the country’s plants were based on coal technology and the prices of coal were prone to wild swings. They touched the peak of $138.50 per ton; though receding recently to $91.85 per ton.

“This volatile movement in coal prices disturbs manufacturer’s margins and some of the industry giants have started to consider implementing other affordable technology which has lower fluctuation than coal and is also environment-friendly,” the analyst says. He noted that the two biggest plants, Lucky and DG Khan had already introduced TDF at their plants. A comparable analysis of using coal verses shredded tires in cement manufacturing reveal the following: Taking coal price at $100 per ton, the conversion to TDF based technology would result in savings of Rs333 per ton or (Rs17 per bag), analyst calculated.

Currently, the average per ton cost of shredded tires is hovering around Rs9,054. However, in case of further decline in coal prices, there would be no benefit from plant conversion, the analyst argues.

He stated that Lucky Cement had completed 20 per cent conversion, which had resulted in annualised cost savings of Rs292 million.

At D.G. Cement, the TDF based fuel plant was currently in trial run and it would be operational in first half of financial year 2013. The successful conversion to TDF from coal was thought to enable the company to lock in Rs1.4 billion annually.

Going forward, TDF technology being less expensive and 25 per cent more efficient than coal, companies turning to the new technology could minimise energy costs. However, the industry-wise benefit was murky due to higher interest rate scenario, which would block plans of many companies to convert their coal based plant to alternative fuels.