Cement supply to improve soon, Pakistan

Cement supply to improve soon, Pakistan
Published: 15 May 2006

The completion of capacity expansion in the local cement industry in the next couple of months is likely to considerably ease the supply situation even for high demand periods, industry analysts believe.

Information available with this reporter suggests that in the period between the months May and July, Bestway Cement would enhance its existing plants’ capacity by 8,000 tons per annum. In the same period a new plant of this company with a capacity of 189,000 tons per annum would be starting production. Pakistan Cement is also expected to start production with a capacity of 211,000 tons per annum. Another significant player in the market, DG Khan Cement Company, is expediting work to start production at its new plant with a capacity 211,000 tons per annum.

Cement prices have been witnessing a decline in the last few days because of a drop in demand as temperatures are rising. Labour is engaged in wheat harvesting. These two factors have slowed down construction activity. Falling prices of cement have started to worry importers who had jumped up to take the government’s offer and have booked orders for about 300,000 tons of cement from neighbouring countries.

“Actually, bulk of the commodity is consumed by the public sector development schemes. Executing agencies of projects expedite work on schemes in the last 4-5 months of each fiscal, giving a false indication of demand for cement in the country,” a government official said and added that every year from February to May demand for cement demand increases allowing market forces to increase prices.

A cement manufacturer claimed the government took punitive measures against cement firms for market reactions in which they were not directly or indirectly involved. “The rise in the prices had really worried manufacturers, since it was traders and middleman who were jacking up the price and manufacturers had no way of influencing them,” he said.

An official of another company said the government looked at the prices of cement in a different perspective. Official circles believe that it is cement prices that increased the construction cost. But the reality is different, if we look at the cost of other construction materials such as bricks, steel, crush, sand, we see that their prices also contribute to rise in construction cost, he added.

If we exclude the last three or four months, cement prices went up only 10-20 percent, he said. He said cement consumption went up around the same months in the last and current fiscals, which must be seen in a special context.

He said in the last fiscal cement prices had shot up around March. But prices had come down gradually when the demand and supply situation improved, he added. There was some increase in price of the inputs used for cement manufacturing. There is always the inflation factor in the prices, which the government ignored in the prices of cement.

The other factor is the imposition of duties. If the imported cement can be exempted from taxes, then why not the local cement from duties, he said. The other major factor is escalation of transport charges. The government has given freight subsidy on imported cement, but what keeps it from giving same facility to the local cement industry, he asked.