Cement prices to go up by Rs50 per bag

LAHORE: Cement manufacturers nationwide have decided to jack up cement price by Rs50 per bag after the hike in fuel prices recently. Sources familiar with the matter told Pakistan Today that the price hike is likely to be initiated from the northern region.

Industry sources told Pakistan Today that the impact of recent price increase would partially offset the impact of higher coal prices. They said that possibility of further price increase is likely in the North region, which has been plagued by a price-war like situation for the past few months, which would be adjusted on weekly basis and southern region would follow suit.

Highlighting current retail prices in North region, sources said that prices have been hovering around Rs450-485 per bag, witnessing a downward trend of 5 to 9 per cent since the start of current fiscal where the Maximum Retail Price (MRP) ranges between Rs500-515 per bag.

They expect that the sustainability of incremental pricing remains a concern in the backdrop of upcoming capacities ahead of schedule. The industry is expecting 4 million tonnes of additional capacity to come online by July 2018 and September 2018 respectively.

Sources pointed out that currently, coal futures have been trading at $94/tonne; the backwardation in futures hints towards the possibility of softness in coal prices in the short-term as seasonal demand subsides. They said that the pricing pressure increased during Jan-February 2018 and the average coal price in February peaked at $95 per tonne.

Sources told that margins of cement companies took a dip in the second half up to 34 per cent.

Sources said that cement dispatches recorded at 30.05 million tonnes which were 14 per cent higher against last year, whereby local sales continued its growth momentum to 18 per cent. However, they said that exports’ on the other hand, kept on getting a downward slide of 13 per cent. Average utilisation level of the industry stood at 90 per cent.

Keeping in view the strong sales growth momentum, sources said that demand is expected to remain robust in March-April 2018 as winter season walks out.

They were of the views that cement sales for February jumped by 8 per cent to 3.72 million tons, driven by better local and exports sales.

Talking about capacity expansion in the Southern region, they said it would increase focusing towards exports to achieve optimal utilisation of plants while maintaining supply balance in the local market. On a sequential basis, however, cement dispatches are expected to decline by 9 per cent on month on basis owing to seasonal effect where rainfall was witnessed up-North, hampering construction activity.