Pakistan cement manufacturers have urged Prime Minister Yousuf Raza Gilani to use the opportunity provided by the cricket match at Mohali in India to resolve the issue of cement exports to India by asking the Indian Prime Minister to allow import of cement through Wagah. Director Marketing & Sales of DG Khan Cement Fareed Fazal said, “This would create a win-win situation for both the countries.”
InvestCap – brokerage house – estimated that Pakistan’s northern region cement manufacturers has surplus capacity and can meet Indian requirements of cement. It pointed out that the export price to Afghanistan is currently around US$42-45/t. If transportation via the Wagha border is allowed, the companies in the north are expected benefit from smaller transportations cost compared to exporting cement via port.
According to InvestCap, northern cement manufacturers have an exportable surplus of 18.8Mt from their total capacity of 35.8Mt, whereas India’s northern region has a deficit of 4Mt, which can be met by Pakistan. During 8MFY11, Pakistan exported 320,000t cement to India (- 24 per cent YoY), which is marginal if one looks at the total cement deficit that India is facing at the moment. Thus cement exports to India’s northern region by manufacturers in the north of Pakistan remains a sound possibility for both parties.
It was pointed out that a Board of Indian Standard (BIS) license is essential for any exports to India. The BIS licenses of some players in the northern region of Pakistan have already or are nearing their expiry date (which is highlighted by the decline in exports to India).
However, a green light from the Indian government might enable local players to resolve such matters in a timely fashion. If this scenario does materialise, it will provide the ailing cement industry with the much needed boost. This can be fruitful for players like DG Khan and Fauji Cement Company among others. Meanwhile, with the increase in international prices of coal, domestic prices of diesel and packing material the prices of cement in both north and south region have gone up by PKR20 and PKR15/bag, respectively.