Cement sector sees infighting on capacity utilisation issue

Cement sector sees infighting on capacity utilisation issue
Published: 19 February 2004

Differences have cropped up in the Pakistan cement industry over capacity utilisation, since the southern region is demanding that capacity utilisation be increased and the northern region is not agreeable, industry officials and analysts said here Tuesday. ³The issue is about providing a level playing field to all members of the industry,² said Abdur Razzaq Thaplawala, executive director at Lucky Cement, one of the major companies in the southern region. He said if the issue is not properly managed then it always creates problems and added that low capacity utilisation puts pressure on the overall performance of any company.

Another senior official at Attock Cement, said there was pressure on the industry, especially from companies in the southern region, to raise production limits. He said companies in the southern region operate in different conditions than those in the northern region.  ³When the production cap is governed in line with the requirements of northern region then it create excessive pressure on the companies in the southern region,² the official said.

A local cement cartel was apparently formed in May 2003 when all the cement factories slashed output to around 60 per cent to boost cement prices. Currently cartel firms are utilising 65 percent production capacity. There are 24 cement plants in the country with total production capacity of the cement sector exceeding total demand in the country.

Now that differences have emerged amongst the cartel members some analysts are already predicting that this might precipitate break-up that could start a price war. But industry representatives are saying ³all is fine.² Tariq Saigol, chairman All Pakistan Cement Manufacturers Association (APCMA), said the situation is fine and that there no chances of any price war in the sector. ³There is no cartel to govern prices and in every industry the members discuss market situation, which is not negative,² Mr Saigol said.