Cement sales during the first six months of the current fiscal year registered a growth of 12.09 per cent as construction activity in the country was in full swing despite the fact that during this period prices escalated for some time.
According to a statement of All Pakistan Cement Manufacturers Association, during the first half fiscal year, ending on December 31, 2005 the rate of growth in cement demand sharply contracted as compared to corresponding period of last year.
Total dispatches of cement from the factories during this period amounted to 8,756,452t, which though compared favourably with total dispatches of 7,812,215t of last year, showed year-on-year growth of only 12.09 per cent, which was sharply down from the 24.14 per cent growth witnessed in the corresponding period of last year. Thus, in aggregate terms, cement dispatches grew only by 944,237t, and in percentage terms by 12.09 per cent.
In the domestic market, demand grew by only 13.45 per cent, whereas last year it had grown 21.23 per cent. Exports of cement showed negative growth of 0.24 percent owing to reduced demand from Afghanistan, possibly due to financial and infrastructure constraints.
Cement prices had also surged to an all-time high in certain parts of the country - up to Rs 325 per bag in October - owing to temporary reduction in output due to unscheduled plant stoppages, which could have impacted the off-take of the commodity.
Capacity utilisation during the period was recorded at 85.58 per cent, which was down from 87.25 per cent for the corresponding period of last year. It must however, be clarified that the total installed capacity, which was 17,908,550t last year, has risen to 20,900,750t with some new kilns coming into production.
During the remaining part of the financial year, several new kilns will come into operation, raising the capacity to 24,646,250t by the end of the current financial year, and a further 9,891,000t in the first half of next financial year.
As predicted, cement prices, after peaking in October, started receding and have come down from a high of Rs 325 per bag to as low as Rs 260 per bag, in certain cases.
The average selling price is less than Rs 270 per bag in the retail market, and supply-demand factor has contributed to price stabilisation. This should put to rest the concerns, in some quarters, of a cartelisation in the industry, and reinforces APCMA’s stance that price surges experienced in the past had been due to supply-and-demand factors, and not due to cartelisation.
The cost of production continues to rise sharply owing to a number of reasons, not least is high cost of energy, including rapid hikes in the price natural gas and HFO, sharp rise in interest costs, and continuing increase in cost of transportation of raw materials, particularly imported coal for the cement factories, and transportation of the finished products to market.
The Monopoly Control Authority, on an enquiry, which was started in 2003, finally passed orders against most of the cement manufacturers in late 2005, which have been appealed in superior courts on various factual and legal grounds by almost all members of the Association. Since the matter is now sub judice no comment may be made on the subject. (Business Recorder).