ROBUST CEMENT EXPORT

SHAMIM AHMAD RIZVI
Feb 25 - Mar 02, 2008

The cement industry in Pakistan has made phenomenal progress during the last few years. Besides meeting the rising demand within the country, cement manufacturers exported over six hundred thousands tones of cement in January 2008 improving from monthly average of about five hundred thousands tones during 2007. Despite making huge profits as a result of increased production and sales, the fabulously rich cement manufactures continue to fleece the consumers ruthlessly by increasing the sale prices after short intervals.

The cement cartel has increased the ex-factory prices of 50kg bag by Rs 12 pushing the sale price to about Rs 240 per beg w.e.f 1-2-2008. According to the industry sources that prices may further rise in the coming weeks when the construction activities pickup in the approaching summer.

According to a report released by J.S. Research Capital, the cement exports posted a record high level to reach at 618,000 tones in January this year. Exports have increased by a massive 152 percent on year-on-year basis and by 60 percent as compared to December 2007. Previous high record was made in august 2007 when exports stood at 575,000 tones. On the other hand, local dispatches stood at 1.6 million tones in January 2008 down by 13 percent compared to Jan 2007.

Cumulatively, cement sales during first 7 months of FY08 depicted an increase of 21 percent to stand at 16 million tones, owing to the expanding local demand and growing cement shortage in the region leading to higher exports. Export sales thus have shown a commendable increase of 148 percent while local dispatches saw a rise of 6 percent during the first 7 months of FY08.

In terms of company-wise breakup, Pakistan Cement posted highest growth of 119 percent as its sales stood at 1,373k tons in July-Jan 2008 versus 628k tons in the same period last year. The second highest growth of 73 percent in dispatches was of Maple Leaf, followed by DG Khan and Lucky Cement, as they posted a growth of 62pc, and 28pc, respectively. In terms of quantity dispatched, however, Lucky remained the market leader with its highest dispatches of 3,134k tons. However, DG Khan following its expansion at Chakwal also made healthy volumes at 2,242k tons sales in Jul-Jan FY08.

FLEECING OF CUSTOMERS

According to the industry sources, there was a dire need for increase in cement prices to offset the high fuel costs as FOB coal prices have now moved above US$130 to 140 per ton. They said ex-factory prices to be raised to round Rs 245-250 per bag, in order to mitigate impact of rising input costs and to improve their margins. The manufacturers were of the view that all the cement plants were under pressure as prices of coal and costs of other inputs have been increased to record level but till the elections they have no plan to increase prices. He further said, the cement was laying in surplus quantity and no such demand in the country due to winter season but definitely prices will go up after election in the country.

An insider, however, confided to this correspondent that despite all the increased cost of fuel (coal + gas) it does not exceed more then 37 per cent of the total cost of production. The cost of raw material, financial cost and the running expenses come to about 20 per cent and taxes come to about three per cent of the total cost. Forty per cent is the average rate of profit, the cement manufacturers are making these days. He revealed that a medium size cement factory located in Haripur producing about 3000 tones cement a day was making a profit of 60 lacs a day. So there is dire need to curtail the rate of profit of this selfish maphia, he added.

Unchecked profits of manufacturers are the main factor, which has been instrumental in raising the prices of products and fleecing of customers. This applies to all types of manufacturers of products as there is no law fixing the maximum rates of profits to save the consumers from this criminal fleecing. This is high time that the authorities look into it in the larger public interest.

There is an association of cement manufacturers in Pakistan, which works like a cartel as it takes decision about the prices, which are strictly following by all its members. It is a fit case to be taken up by the competition commission of Pakistan which is mandated to curb restrictive trade practices and cartel like behavior of the industry.