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Thursday – September 05, 2019 (
Export of cement and clinker from Pakistan on the rise
The Pakistan cement industry experts predict a greater clinker export potential for export since excess capacities in China have been curtailed substantially over environmental concerns, while demand from Bangladesh and other countries are also growing. India and Vietnam as well as east Africa (and particularly Uganda and Tanzania) remain viable export destinations for Pakistani cement producers, said Irfan Chawala, finance director and CFO at Lucky Cement Ltd and Irfan Amanullah, general manager of Attock Cement Pakistan Ltd during a seminar by a local research house.
Pakistan has recently resumed export of clinker and a further cargo of 48,660t of clinker, laden by a foreign vessel, sailed from Pakistan International Bulk Terminal on 9 April 2018. Pakistan has a total clinker production capacity of 47.08 million tons yearly.
In the next 10-15 years, India may become a blue chip market for Pakistan cements as its reserves of limestone are dwindling fast. Moreover, inter-state Indian tax issue and logistics make it difficult for various states to buy cements from each other, therefore allowing them to prefer importing cement from Pakistan. Low transportation costs also make India an attractive market for Pakistani exports.
Lucky Cement and Attock Cement have exported clinker from the south zone and looked into exporting Pakistani clinker. Attock Cement recently inked a deal for the export of approximately 150,000t of clinker at US$34/t FOB, Karachi with overseas buyers. Attock Cement would export 150,000 tonnes of clinker from Pakistan International Bulk Terminal Ltd (PIBTL), where a ship carrying clinker already sailed in the third quarter of 2019. They added that another major southern player of south is also in the process of finalizing the export of clinker. The same company had last exported 105,000 tonnes of the product in 2003 to the growing market of UAE.
Some cement players had been exporting small cargoes of 2,000-5,000 tonnes of clinker in containers for the last two to three years. However, bulk movement of clinker would restart after 14 years.
Pakistan's cement industry dispatches in July, the first month of the FY19-20, fell to 3.5Mt from 3.6Mt in July 2018. This translates to a decline of 2.8 per cent, primarily due to a slowdown in domestic demand as the economy contracts rapidly owing to policies targeting runaway budget deficit and the current account gap, says local media.
The industry's capacity utilization also reportedly dropped to 70 per cent from the average levels of 85 per cent. Industry observations show it is the continuation of a trend which entered the market in the last fiscal year because of the government policies targeting massive demand contraction. The downturn in cement sales is feared to be sharper in August and beyond, a manufacturer estimated. The cement sector is also concerned that domestic consumption is likely to decline further unless construction activity picks up.
The industry data for the last fiscal year, which is yet to be released by All Pakistan Cement Manufacturers Association (APCMA), showed local dispatches slumped 1.9 per cent to 40.3 million tons from the preceding year. However, total industry sales rose by 2.1 per cent on the back of a 38 per cent surge in overseas shipments.
With the state of the art loading facility at PIBTL and competitive rates offered by the terminal operator, more international buyers would now look towards the country.
A cement maker said the government and the Port Qasim Authority should consider the abolishment of royalty rate on export of clinker from Pakistan in order to make the product more attractive for foreign buyers.
He said the excess cement capacity, coupled with devaluation of the rupee against the dollar, can be attributed to the recent export order. The participants in the recently concluded cement conferences (CEMTECH and INTERCEM) held in Dubai in February and March also took strong interest in Pakistan’s cement sector’s changing dynamics, especially with reference to growing demand and huge incoming capacities. The industry supply would increase by 20 million tonnes in the next three years and reach 70m tonnes in 2020, he added.
Clinker is a semi-finished product which is grinded with gypsum and iron ore in the cement mill.
Cement price: In the current month, brokerage houses have been running reports regarding the frequent increase in cement price in March, while industry participants offered a different view.
According to Nabeel Khursheed of Topline Securities, north producers increased the cement price by a cumulative Rs40 per bag with another Rs10 per bag expected in the next one to two days which would take north prices to Rs520-530 per 50kg bag. However, prices in the southern region have thus far remained intact. An analyst at Shajar Research said cement prices had recovered by Rs40-50 per bag in the north which would improve margins of manufacturers.
A cement maker in south contradicted, saying the actual rise in cement price in March was Rs20 per bag. Another noted that there has been an unprecedented surge in demand which has forced the market to adjust and in some cases withdrawn the concessions on maximum retail price (MRP) while one or two companies had raised MRP.
He said the prices are still below last year’s level despite the increase in federal excise duty (FED) by Rs15 per bag, followed by increase in coal and diesel prices. He added the price trend in North is still lower than South and the industry is continuously increasing its capacity.
Rise in the cement demand was predicted long ago and the government was asked to review some of its policies as input cost was being pushed up due to the surging coal prices, he continued. The industry had urged the government to abolish FED and import duty on coal to bring down the cost of production.
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