Rising cost of coal set to raise cement prices


KARACHI: A likely rise of eight percent in international coal prices due to supply concerns will encourage local manufacturers to raise their prices. Coal is an essential raw material in cement production. This rise comes at a time when there is a 12 percent monthly decline in domestic cement sales in November.
The international coal prices have shot up to $117 per tonne recently since December 1, due to supply concerns arising due to floods in Australia, the world’s biggest exporter of coal; local cement prices currently stand between Rs 335 to 340 per 50 kg sack.
Similarly local cement offtake declined to 1.73mn tonnes in November, which was a rise of one percent in annual terms. The decline in demand can be mainly attributed to fewer working days in November and the upturn in October sales due to the recovery of demand in flood affected areas.
Moreover, the export sales were far from encouraging, down 11 percent and 28 percent in annual and monthly terms, respectively. International prices discouraged domestic manufacturers.
The staging of the Football World Cup in Russia and Qatar in the course of the decade is expected to be a long-term boost for the industry. The construction of the Diamer Bhasha dam will hopefully enhance local demand and sales growth is expected to gather momentum after the first half of FY2011, when flood reconstruction activities begin to pick up.
According to the details, cement offtake declined by three percent and 17 percent in annual and monthly terms, respectively. Unattractive prices in the region, particularly for plants based in the North, was the primary reason for lower export sales.
Moreover, local offtake in the fifth month of FY11 stood at 8.32m tonnes, down nine percent YoY. Sales in the northern part of the country were down 11 percent YoY, hampered by torrential rain in July and August.
Exports during the same period fell by 18 percent YoY on account of lower sales to India and the Middle East/Africa. However, demand from Afghanistan remained robust, with sales up 18 percent YoY, indicated Atif Zafar at JS research.