Cement exports from Pakistan are still lucrative due to the commodity’s high demand and shortage in the region, especially in India and the UAE, placing Pakistan in a favourable position to further increase its exports.
According to latest data, cement sales increased by 24 per cent in 10 months (July-April) of fiscal year 2008. This growth has been primarily due to a 142 per cent jump in exports during the period.
At present, neighboring India and the United Arab Emirates are the key export markets for Pakistani cement because of an unprecedented increase in their construction activities, brokerage house JS Research reported on Friday.
Indian authorities have been desperately trying to reduce local cement prices to ease rising inflation. For this purpose, they have in the past six months imported around 300,000t of cement from Pakistan and are planning to double it to 600,000t by June. Currently, India is facing a shortage of around 5 to 6Mta.
Cement demand in the UAE is likely to stay higher with an expected 23.5 per cent growth in construction activities this year. Moreover, with cement shortage of around 2.5 to 3.5 million tons in the UAE and export ban in major exporting countries like Egypt and India, Pakistan is poised to reap the benefits of regional shortages. Besides, the shortage of limestone in the Middle East is expected to keep cement production under pressure in the region.
Along with cement, clinker demand is rising in the UAE. As clinker price free on board (fob) from Pakistan is low at $64 to $66 per ton, it is quite cheap for the UAE importers.
Similarly, in order to cut down construction costs, cement producers in the UAE have agreed to reduce the price cap from 17 UAE dirham per bag (Pak Rs302 per bag) to 16 dirham per bag (Pak Rs284). However, the export of cement from Pakistan is still attractive at fob price of $70 per tonne (UAE dirham 12.4 per bag, Rs242 per bag). Adding average freight cost of $5-10 per ton it will take landed price of Pakistani cement to around $75-77 per ton (UAE dirham 14 per bag, Pak Rs260 per bag). So, Pakistan’s cement is still competitive for exports to India and the UAE.