Reportedly the first consignment of cement from Pakistan is expected to cross the Indian border in the next two weeks. India recently agreed to import cement from its arch-rival to satiate the increasing domestic demand, spurred by a booming housing industry and infrastructure development programmes.
Karachi Port has the capacity of 7,000 tonnes per day and can export up to 2.55Mta, which hardly makes an impact on Indian consumption levels said an analyst with Alchemy Share & Stock Brokering firm. Even if Pakistan exports this full capacity, it would still be 2% less than the daily Indian consumption.
Pakistani commerce secretary Syed Asif Shah said the first tranche of cement would arrive in India by the end of August. But there’re many hurdles before them. A cement analyst who did not wish to be named said, "Even the option by road or rail does not make economic sense. Moreover, importing via the inland border needs many security clearances."
Logistics, say experts, will be a big issue. Imports could come through Kandla, Mumbai, Kochi, Chennai, and Vizag, but transporting stocks over longer distances from ports would increase the freight charges by up to Rs1000 a tonne beyond a distance of 200 km.
Lucky Cement, the largest cement producer in Pakistan, would be an important player, but others like DG Khan Cement Co, Bestway Cement, Maple Leaf Cement and Attock Cement may come under margin pressure due to high freight costs.
Cement prices may rise further by Rs 3-5 per bag after the monsoon, said AK Saraogi, CFO & president (corporate affairs), J K Cements, in a analysts’ teleconference earlier this month. Meanwhile, cement prices went up by nearly 45% between January 2006 and July 2007. The average cement price in January 2007 stood at Rs 209 per bag while in July, it went up to Rs 229 per bag.