Cement prices increase amid low period of demand ahead

LAHORE: Cement makers are taking a seventh consecutive leap of increases in prices, especially in the North, amid a period of low demand ahead, it was learnt.
Sources in the industry told Pakistan Today that the price increases this time will be over and above the recent price hike of Rs40 to 50 per bag, and will be followed keeping in mind the rupee devaluation that had started escalating from the beginning of last month. They said that most of the recent price increase was absorbed by dealers, through price discounts offered to them, while Rs10-20 per bag have been passed on to the end consumers.
They said that few manufacturers have now been revising their maximum retail prices (MRP) to match the disparity between retail sale price and MRP.
Sources said that the current price range for the north region hovered around Rs490-530 per bag while the prices in south region remained stable at Rs570-600 per bag range.
Given the timing of price hikes that started in March 2018, they said that two months of depressed prices had been raised following the coal prices amid seasonal demand for the third quarter which hovered around $93 per ton, and 4.5 per cent devaluation of the rupee in third quarter of fiscal 2018. They believe any positive impact of the current scenario on sector margins is unlikely to be seen in the third quarter of fiscal year 2018.
Industry sources further added that the impact of the previous price increase had partially offset the impact of higher coal prices. They said that the possibility of further price increases is likely in the north region which has been plagued by a price-war like situation for the past few months, to be adjusted on a weekly basis, while the southern region would follow suit.
Sources believe that the impact of the recent price increase would partially offset the impact of higher coal prices that has been trading at $98.5/ton and 5.1 per cent rupee devaluation on fiscal 2018 margins and earnings of cement companies.
A delayed impact of the development, however, can be partially seen in the last quarter, where they expect a period of low demand in May-June 2018, which would be leading the price to Rs10-15 per bag.
They were of the view that two factors were expected to offset each other, may lead to stable margins in the last quarter against the third quarter of fiscal 2018. Nevertheless, they say margins in the south region are expected to take a hit.
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