Monsoon affects Pakistan’s cement exports to India

Monsoon affects Pakistan’s cement exports to India
Published: 12 August 2008

Pakistani cement dispatches to India have declined by about 50 per cent owing to monsoon, which has affected demand from Indian buyers. According to the All Pakistan Cement Manufacturers’ Association (APCMA), the average daily cement export to India has come down from 4000t in June to 2000-2500t now.

“Cement dispatches to India through the sea route have been significantly affected by the rains. Moreover, there has been a slackening of demand due to rains,” said Shahzad Ahmed, secretary, APCMA.

Pakistan has exported about 1Mt of cement to India since September 2007.

However, this is an insignificant quantity, in view of the Indian market size of about 170Mt. It has, therefore, failed to impact prices except in certain pockets. The price realisation for Pakistani companies on cement export to India is US$52/t, whereas the delivered cost to Indian buyers at Mumbai port/Wagah is US$72-73/t. This translates into INR153 every 50kg bag, which is significantly cheaper than INR235-250/50kg bag of Indian cement.

“The companies are incurring loss with exports to India since the cost of production is about US$68/t. However, there is a surplus after meeting domestic demand and it needs to be exported. Companies may look at a price hike if Indian manufacturers raise prices,” he said.

Ahmed said the Pakistani cement industry is going through a tough time owing to sharp jumps in input costs of coal, electricity and packaging bags. “The industry has suffered a loss of nearly US$70m in the July-March period owing to high input cost and low price realisation,” he said.

In April 2007, the Indian government had scrapped the 16 per cent countervailing duty on cement imports to facilitate imports and augment availability.

It also withdrew the four per cent special additional customs duty. In January 2007, it announced zero duty on cement imports. All these measures have rendered cement imports duty free. The Bureau of Indian Standards (BIS) has granted quality licences to 15 cement firms in Pakistan after the Indian government relaxed cement import norms in 2007.

Manufacturers based outside India need to conform to BIS-certified quality standards before supplying cement.