Pakistan cement prices have jumped steeply from Rs 250 per bag to Rs 305 per bag in recent days - registering an increase of Rs 55 per bag, cement analysts said. The Daily Times reports that cement manufacturers have recently raised prices by Rs 10 and Rs 15 per bag in South and North respectively.
The recent hike boded well for the industry in the given stable coal prices as manufacturers are making spot coal purchase.
Northern region remains the key beneficiary of the recent hikes due to higher dependence on local sales, recent trough margins and higher price increase. While expected commencement of additional capacities in North (Fauji) pose downside risk to prices, analysts noted that the lessons learned from last year’s price wars will likely override desires to reach optimum utilisation. After witnessing its lowest levels at Rs 245/bag in 1st half FY10, cement manufacturers have been implementing successive hikes, with current cement prices up Rs 43/bag from Jan10 levels at Rs 252/bag. The Gross margins remaining depressed during nine months FY10 will likely start improving from forth quarter FY10 onwards.
Meanwhile, Fauji Cement Company’s 2Mt expansion is expected to commence production in first half of the current fiscal. While addition in capacities poses downside risk to margins, cement manufacturers will likely stick to the lessons learned from last year’s price war.