While expressing the hope that increase in cement demand will continue in months ahead, as GDP growth levels has stabilised above the six per cent per annum mark, Tariq Saigol, chairman of the All Pakistan Cement Manufacturers Association (APCMA) has urged the government to reconsider the APCMA’s long- standing demand for excise duty waiver. He said the expected increase in cement output is likely to double to 40Mta by the end 2007.
He said the demand for cement suddenly surged from February onwards during the 3rd quarter of the financial year ended on March, 31 2006, after a somewhat lacklustre performance in the previous quarter. For the January-March 2006 period, total dispatches of cement reached 4,211,837t in the domestic market showing a growth over the corresponding period of last year of 16.83 per cent and in the export market to 381,802t showing a growth of 23.85 per cent, he added. In aggregate terms, cement dispatches grew over the corresponding period last year by 680,126t which in percentage terms amounts to a 17.38 per cent gain.
He also noted that the total dispatches of cement in the domestic and export markets for nine months of the current financial year from 1-7-2005 to 31-3-2006 amounted to 13,350,091t which shows a year to date growth of 13.85 per cent over the corresponding period. This is an encouraging sign as growth had somewhat faltered in the last quarter of calendar year 2005. It now appears this may have been owing to slackening of demand during the winter season and ill-effects of devastation caused by the earthquake in Azad Kashmir which impacted on availability of labour at construction sites and diminished demand from Afghanistan.
No sooner the weather improved in February 2006, strong demand resurfaced from public-sector projects, private-housing and construction programmes, commencement of reconstruction work in Azad Kashmir and reinvigorated demand from Afghanistan. Small quantities are also being exported to the Middle Eastern markets through sea route.
About capacity utilization during the period, he said it was recorded at 87.10 per cent which compares favourably with 87.41 per cent in the corresponding period last year on a somewhat increased capacity base by addition of new kilns and augmentation of production capacity of some units. Base installed capacity has increased now to 21,593,750t. To date during the year, capacity utilisation was recorded at 86.31 per cent in the first nine months compared with 87.10 per cent in the previous year.
Owing to sudden surge in demand, prices of cement have shot up starting end-February 2006 and are now again as high as Rs. 325 per bag at the wholesale level. In retail markets, small quantities are reportedly being sold at even higher prices. This is a matter of concern for the APCMA and its members, despite releasing ever larger quantities to the market and operating the plants at full capacity levels, are unable to meet the strong demand from the market. The supply-demand imbalance has led to prices again climbing to unacceptable levels as had happened in October 2005. However, owing to the onset of the winter season and increase in output, prices receded to acceptable levels around Rs 275 per bag by end October 2005.
The APCMA has maintained close contact with the government on the supply situation and prices of this vital commodity and had recommended that duty-free import of cement should be allowed till the time the new plants came into operation. This recommendation was accepted last year, but owing to high prices prevailing in the international markets and shortage of cement globally due to a construction boom in the Middle East and Iran imports have not been feasible. The APCMA has also been requesting its members to curtail exports, feed the domestic market on a priority basis and make supplies on holidays and Sundays. Inventories with the mills, however, are at an all-time low.